Although Japan hopes to negotiate an eventual exemption from Trump’s far-reaching 25% tariffs following in the footsteps of the US-Britain trade deal, the strain from the Trump administration’s announcement of reciprocal tariffs on steel, aluminium, automobiles and key auto parts has already begun to reverberate through Japan’s economy.
Tracking the yen’s appreciation
Currency watchers will have noted the weak yen—that we witnessed throughout much of 2024—has rallied in recent months, appreciating against the dollar to a seven-month high and hitting levels not seen since September 2024 (139 yen to the dollar—see the latest USD to JPY exchange rate). The irony here is that, at a time where the government has further reduced gasoline subsidy support compared to 2024, we may see some downward pressure on gasoline prices—supported by OPEC’s willingness to raise supply. Nonetheless, there remains considerable oil price volatility given general market uncertainty caused by the tariff announcements in the first place and global stock market reactions. The wider impact must also be considered regarding the potential disruption to international shipping and logistics. A knock-on effect to Japan’s domestic logistics market could be expected, as firms scale back export production and move less cargo and through different domestic routes.
For the time being as negotiation continues, the Japanese government is trying to brace for the full force of the tariffs, by announcing stimulus measures to help protect against potential economic fallout, from supporting company cash flows, to ensuring employment retention and stimulating domestic consumption as counter-measures.
