Trade and Currency Disputes Are Backdrop for Trump’s Meeting With Abe

While Prime Minister Shinzo Abe has turned to golf again to charm President Donald Trump during his visit to Japan, the weak yen and huge trade surplus with the U.S. remain friction points in the bilateral relationship.

Trump singled out Japan for criticism on its currency and trade policies during his election campaign and early in his administration. With no sign of significant change in the yen or the flow of goods, Abe will need all his diplomatic skills to keep the friendship warm.

Specific areas of contention that could come up for discussion range from Japan’s car imports and exports to its pricing of medicines, which affects U.S. pharmaceutical makers.

During talks in October, progress was made on issues including lifting of restrictions on Japanese persimmons and on U.S. potatoes from Idaho, and Japan agreed to streamline noise and emissions testing for American car exports.

A weaker yen, which has dropped about 26 percent versus the dollar since Abe came to power in late 2012, has been a godsend for Japanese exporters.

“Japan’s No. 1 priority is still keeping the U.S. from talking about foreign exchange,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo . “The Abe administration is very sensitive about it because it pursued its policy to get a weaker yen and higher stocks.”

Trump has previously accused the country of manipulating the currency and said in January that China and Japan “play the money market, they play the devaluation market and we sit there like a bunch of dummies.” While he hasn’t escalated his criticism recently, Japan remains on a U.S. watch list of nations for unfair currency practices.

Yet Japanese investment in the U.S., which creates jobs for Americans, is also rising significantly. Japanese auto companies have invested hugely in U.S. plants, bringing manufacturing jobs that Trump wants.

Source: Bloomberg