Will the yen depreciation be corrected due to pressure from the Trump administration?

The Trump administration has consistently criticized “excessive yen depreciation and low-interest-rate policies that fuel the trade deficit,”and is wary that the Akie administration’s expansionary fiscal policy is provoking yen depreciation.

If extreme yen depreciation in the 162 yen range continues, a scenario in which direct pressure is applied at a Japan-U.S. summit or at the finance minister level becomes realistic. In the past, they have stated to Japan that “currency devaluation is unfair” and have warned in exchange-rate reports, etc.

Tariff increases may deal a blow to export companies and, as a result, could exert pressure to correct the yen’s depreciation, but they are unlikely to lead to a fundamental solution. They can also cause side effects such as domestic inflation in the United States and supply-chain disruption, and the Japanese side tends to soothe this by expanding direct investment in the United States, a pattern that repeats. For households, there is an added risk of further pushing up import prices.