U.S. President Donald Trump’s push for a stronger yen is adding tension to ongoing trade talks with Japan, raising economic and political risks. Trump recently accused Tokyo of weakening the yen to gain trade advantages—allegations that have now placed currency issues on the agenda during bilateral negotiations in Washington.
Japanese economy minister Ryosei Akazawa met with U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson, with Trump making an unexpected appearance. While Akazawa said currency matters weren’t discussed, analysts believe Finance Minister Katsunobu Kato will face pressure when he arrives in Washington next week for IMF and World Bank meetings.
Trump’s stance echoes the 1985 Plaza Accord, where major economies devalued the dollar. Speculation now surrounds a potential “Mar-a-Lago Accord,” named after Trump’s Florida resort, suggesting coordinated efforts to weaken the dollar. Citigroup warns Japan, with its large foreign reserves and an undervalued yen, could be a key target.
However, Japan intervening in currency markets or pressuring the Bank of Japan to raise interest rates could derail its fragile recovery and violate central bank independence. Selling U.S. Treasuries to support the yen would also risk destabilizing global markets, especially with nearly $15 trillion invested in U.S. debt.
The yen has strengthened recently, with the dollar slipping below 142 yen amid rising fears of a U.S. recession. Meanwhile, speculative bets on yen appreciation have reached record highs, signaling a volatile environment.
Despite Trump’s urgency, Japan is unlikely to offer a quick fix. The BOJ remains cautious amid inflation and upcoming elections, and Japanese officials maintain they are not manipulating the currency. With fragile debt markets and political constraints, any aggressive move to weaken the dollar could backfire.