Photographer: Kiyoshi Ota/Bloomberg

The Yen's Swift Decline Could Go Too Far

  • Weakness could push import prices too high, says Shimomura
  • No changes seen in U.S.-Japan security alliance under Trump

The yen’s swift decline in the wake of Donald Trump’s election victory last month could go too far, according to Hakubun Shimomura, a senior member of Japan’s ruling Liberal Democratic Party.

A weaker currency is generally welcome in Japan because it helps exporters and fuels desired inflationary pressures. But Shimomura, a former education minister and close ally of Prime Minister Shinzo Abe, said he worries that the currency could drive up the nation’s import bill.

"If the yen weakens too much, import prices go up," Shimomura said in an interview in Tokyo on Monday. With most of the nation’s nuclear reactors offline and Japan importing more energy, he said this was "even more the case."

Shimomura said higher import prices could also hurt small businesses that rely on materials from overseas.

"I hope the yen doesn’t get much cheaper than its current level," he said.

The yen was trading at 114.09 versus the dollar at 3:39 p.m. in Tokyo on Tuesday. Since Trump’s surprise win, it has weakened by about 8 percent from levels seen before election results started coming in.

’Good, Balanced President’

Trump criticized Japan during the campaign, saying it weakened its currency to gain an advantage for its exporters. His comments reflected a broad protectionist stance -- more often aimed at China -- that some fear may disrupt global trade when he gets into office.

Trump has also opposed the Trans-Pacific Partnership -- which Abe backed as a catalyst for structural reforms at home. The U.S.-led deal appears dead, with Republican leaders saying it won’t come to a vote in Congress before Trump takes office.

Yet Shimomura expressed optimism about a Trump presidency, echoing sentiment from other Japanese policy makers after a Nov. 18 meeting between Abe and Trump in New York.

"During the campaign, his extreme statements stood out, but since the election I get the impression that he’s a balanced person," he said. "I expect he’ll become a good, balanced president."

Trump warned during the campaign that some U.S. allies, including Japan, would need to pay more for the protection provided by the presence of the U.S. military. But Shimomura said he was not worried about possible changes to Japan’s security relationship with the U.S.

"There’s benefit for the U.S. in this, too. I don’t think there will be any big changes in the U.S.-Japan security relationship," he said.

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