Japan Must Address Yen Manipulation Misunderstanding, Says Ex-BOJ Chief Kuroda

TOKYO (Reuters) – Japan is facing a critical moment as former Bank of Japan (BOJ) Governor Haruhiko Kuroda emphasizes the need to resolve any “misunderstanding” held by U.S. President Donald Trump regarding the country’s monetary policy and its impact on the yen. Kuroda’s remarks come in response to Trump’s recent comments asserting that Japan and China should not continue to devalue their currencies, which he believes would be unfair to the United States.

Kuroda’s Response to Trump’s Comments

In an interview aired on Japanese television, Kuroda addressed Trump’s assertions, stating that Japan has limitations on how much it can influence the yen’s value, especially if the dollar strengthens due to rising U.S. inflation linked to Trump’s proposed tariffs. He pointed out that the Japanese government has been actively working to prevent the yen from depreciating further, including interventions in the foreign exchange market to support its currency.

Efforts to Stabilize the Yen

Kuroda highlighted that after a prolonged period of ultra-easy monetary policy, the BOJ has begun to raise interest rates. This shift comes after the government made rare interventions in the currency market in 2022 and 2023 to bolster the yen, which had plummeted to a 38-year low of nearly 162 yen to the dollar in July. As of this week, the dollar was trading around 148 yen.

“The BOJ is not intentionally guiding the yen lower with monetary policy. If there’s any misunderstanding on that point, it needs to be addressed,” Kuroda asserted. His comments underscore the delicate balance Japan must maintain in its monetary policy while navigating international perceptions and pressures.

Transitioning Monetary Policy

During Kuroda’s tenure from 2013 to 2023, the BOJ implemented radical monetary easing measures aimed at breaking Japan free from decades of deflation and sluggish growth. This included a massive asset-buying program initiated in 2013, the introduction of negative interest rates, and bond yield control measures introduced in 2016. However, these policies have drawn criticism, particularly from the Trump administration, which accused Tokyo of deliberately keeping the yen weak to gain a competitive edge in exports.

Current BOJ Strategies Under Governor Ueda

Under the leadership of current Governor Kazuo Ueda, the BOJ has started to unwind these aggressive stimulus measures. In March of last year, the central bank exited its radical easing policies and raised short-term interest rates to 0.5% in January, reflecting a belief that Japan is on the verge of sustainably achieving its 2% inflation target.

Kuroda emphasized that the BOJ is already normalizing its monetary policy and will continue to do so by gradually increasing rates to levels considered neutral for the economy. In a research paper published in January, he indicated that the BOJ is likely to persist in raising rates in the coming years as inflation trends toward the 2% target.

Global Economic Implications

The implications of Japan’s monetary policy extend beyond its borders. As inflation concerns grow globally, the European Central Bank (ECB) is also facing challenges. ECB Executive Board member Isabel Schnabel recently stated that euro-zone inflation is more likely to remain above the bank’s target than to slow durably. This highlights the interconnectedness of global economies and the need for careful navigation of monetary policies.

In conclusion, Kuroda’s call for Japan to clarify its stance on yen manipulation is crucial not only for domestic economic stability but also for maintaining healthy international relations. As the BOJ continues to adjust its policies, the world will be watching closely to see how Japan manages its currency and responds to external pressures.

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