Japan’s Finance Minister issues warnings over Trump’s tariffs

Japan’s finance minister Katsunobu Kato warned on Thursday that U.S. President Donald Trump’s new “reciprocal” tariffs could shake trade and financial markets and threaten Japan’s economic recovery.

“We’re deeply concerned the recent U.S. tariff measures affect various industries and heighten uncertainty,” Kato told Reuters in Tokyo hours after the talks began. “They could affect Japan’s economy, as well as the global economy, through routes such as trade and financial markets.”

The warning was Tokyo’s strongest since Trump’s April 2 tariff announcement. Prime Minister Shigeru Ishiba’s chief negotiator, Ryosei Akazawa, met U.S. Treasury Secretary Scott Bessent on Wednesday, but Trump unexpectedly dropped in.

Kato will fly to Washington next week for the International Monetary Fund and Group of 20 meetings. He’ll also have a separate session with Bessent. “It’s important for exchange rates to move stably, reflecting fundamentals,” he said, repeating that “excessive volatility and disorderly moves are undesirable.”

He noted that tariffs and recent market swings carry “a risk of exerting downward pressure on Japan’s economy.” When asked if the yen would be on next week’s agenda, he said talking about it now could spark speculation.

Japan wants to keep the yen out of tariffs talk

Trump accuses Tokyo of holding down the yen to aid exporters and of paying too little for U.S. troops in Japan, topics the Asian country wants to avoid. Akazawa said exchange rates “did not come up” at the Wednesday meeting.

“As it has done in the past, Japan’s government could act in the market if there are speculative moves, but it won’t do anything beyond that,” Akazawa told reporters. “Japan isn’t manipulating the market to weaken the yen in the first place.”

For now, the yen is outside the tariff talks, yet traders expect it to return. “I don’t have any memory of Japan ever attempting to guide the yen lower,” Akazawa said. Whether that holds may depend on next week’s Kato–Bessent session and on markets already on edge.

The yen slipped 0.6% to about ¥142.78 per dollar in London trading, though option skews still showed demand for protection against a stronger yen. “The dollar bounded back as traders unwound yen‑long positions,” said Yujiro Goto, head of foreign‑exchange strategy at Nomura Securities.

Yusuke Matsuo, a senior economist at Mizuho Securities, wrote that the coming Kato-Bessent meeting “is likely to carry more weight for FX markets,” warning that Thursday’s moves “could reverse” if the United States hints at a weaker dollar.

Analysts say the Trump administration could also target the Bank of Japan, which kept rates near record lows for more than a decade to fight deflation.

Diplomacy remains an option

While the central bank has started lifting rates, policy remains loose. Kato said decisions rest with the BOJ, but the government will “deepen dialogue” on how tariffs may affect the economy. “There is no change to our expectations the BOJ would guide policy appropriately to achieve its 2 percent inflation target.”

Ruling‑party policy chief Itsunori Onodera said Sunday that Japan must strengthen the yen by boosting industrial competitiveness to curb inflation. Some lawmakers believe Japan should rally other countries to show that tariffs are counterproductive.

Kato said the negotiations will outline how Japan can help revive U.S. manufacturing and narrow America’s trade deficit.

He denied that protectionism makes cooperation impossible. “Obviously, any country would put its interest first,” he said. “But countries have made efforts to iron out their differences. It’s our job as policymakers to seek a better approach that eventually benefits the U.S., Japan, and the global economy.”

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