Politics
Trump 2.0 could bring back the 1980s as the Japanese yen falls
If Donald Trump fans and detractors can agree on one thing about the president-elect of the United States, it's that he is a man of the 1980s.
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It was the decade of its heyday, when the larger-than-life New York tycoons' worldview of business, economics, geopolitics and culture seemed to be solidifying. At the time, it was Japan that Trump saw as the bogeyman eating America's lunch and plundering its future. Today, Xi Jinping's China is the subject of Trumpian anger.
But what would happen if Japan also found itself in the lead against Trump? list of enemies in a way that Tokyo did not negotiate?
There are few ways Prime Minister Shigeru Ishibas' nation could unleash Team Trump 2.0. Enough compliance is not demonstrated by offering Washington significant trade concessions. Another example is the failure of Ishibas' Liberal Democratic Party to act quickly enough to ensure that military spending exceeds 3 percent of gross domestic product.
The real spark could be a weak yen exchange rate, at odds with Trump's 1980s view of global dynamics.
As Trump prepares to return to the White House on January 20, tackling China is his main economic project. Between the slaps Rates 60% on the continent's goods, hampering its technology sector and creating a weaker dollar against the yuan, the Trump team has its work cut out for it.
But the decline in the Japanese yen will certainly be on Trump's radar screen. This is especially true since Trump's anti-China advisers like Peter Navarro and radical trade officials like Robert Lighthizer and Jamieson Greer give him the lay of the land. A key variable is how a weak yen might lead Chinese leader Xi to think that Beijing should also lower the yuan rate.
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In the past, Washington has largely left Tokyo aside when it comes to its beggar-thy-neighbor policy. The idea being that if the ends justify the means and a weak yen revives Asia's second-largest economy, then America will win too. Even Trump 1.0 looked the other way as Japan, then led by Trump ringleader Shinzo Abe, pursued a soft yen strategy.
Things could be very different this time. Trump rejected Ishibas appointment requests since his surprise victory in the November 5 elections. Although Japanese officials say Trump will meet with Ishiba in February, Trump participated in a bilateral meeting with myriad other world leaders, but not with Japan. To add insult to injury, Trump World even invited Xi to Trump's inauguration.
Being on Washington's B list is the last place Tokyo wants to be as Trump launches a trade war like Asia has never seen before. Especially at a time of great economic uncertainty for Japan.
Trump refined his Tariff Man protectionist worldview forty years ago. This was when Michael Keaton was performing in 1986. Gung Hoa story of Japan Inc. exploiting Detroit auto workers. It was at the height of Japan's bubble economy when Washington struck the Plaza Accord currency deal at a New York hotel that Trump owned for a time.
It's an era that Michael Crichton immortalized in his best-selling book Rising sun. And businessman Trump complained during the day on Japanese talk shows that he had systematically sucked the blood of America I sucked blood! They escaped murder. They ended up winning the war.
Not so quickly that deflation arrived in the 1990s. Last spring, the champagne corks popped as unions recorded the largest wage increases in 33 years. This seems to indicate that the virtuous circle of wage and consumption gains that the Bank of Japan worked to produce with 25 years of zero interest rates has arrived.
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Not so much. By the end of 2024, it was clear that average national wages were not keeping up with the rate of inflation. And while China exports deflation, the BOJ decided on December 19 that Japan was not ready to normalize its activities. interest rate. He left official rates at 0.25%.
This presented quite a paradox for global investors who rushed into Nikkei 225 Stock Average shares. If the BOJ thinks Japan still needs economic training wheels after all this time, why should it bet on Japan Inc.?
And even though China faces daunting challenges, including a giant real estate crisis, the Xi team is making strides to improve China's position in semiconductors, electric vehicles, biotechnology, aviation, robotics, renewable energies, artificial intelligence and high-speed trains. China's success in electric vehicles has Honda engine and Nissan engine rushing to join forces. Few Japanese observers had this match on their bingo cards.
The BoJ's reluctance to raise rates has everything to do with the yen. Last July, when the Ueda team increased its prices to highest since 2008the soaring yen panicked Nikkei investors. It also shocked Tokyo's political establishment. It is not hard to believe that Ishibas LDP and its coalition partners are pressuring the BoJ not to tighten monetary conditions in the near future.
Trump's return only raises the stakes. If the yen rises above the level of 160 against the dollar, from 157 today, and moves closer to 170, how long will it be before Trump 2.0 extends the 100% tariffs to Japan that he threat to cars made in Mexico? And South Korea too.
Never mind that Trump's tariffs, dreams of a weaker dollar and trickle-down tax strategy are ripped from the 1980s. And that they seek to revive a global system that no longer exists. The era of the 1980s, to which Trump seems eager to return, could draw Japan into the fray in a way that Tokyo does not anticipate coming.
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Sources 2/ https://www.forbes.com/sites/williampesek/2025/01/03/trump-20-may-bring-1980s-back-as-japanese-yen-drops/ The mention sources can contact us to remove/changing this article |
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