Japan's Asakawa: A U.S.-led, Plaza Accord-style coordinated effort to weaken the dollar is unlikely.

Japan's Asakawa: A U.S.-led, Plaza Accord-style coordinated effort to weaken the dollar is unlikely.

Former top currency diplomat Masatsugu Asakawa has dismissed the possibility of a coordinated effort akin to the 1985 Plaza Accord to weaken the U.S. dollar. Speaking to Reuters, Asakawa, who served as Japan's vice finance minister for international affairs from 2015 to 2019, stated that while the dollar remains a global reserve currency, it has become more susceptible to selling pressure following President Donald Trump's April 2 announcement of sweeping "reciprocal" tariffs [1].

Asakawa noted that the dollar's status as a reserve currency remains solid, but it has become more vulnerable to market forces. He acknowledged that a weaker dollar could accelerate U.S. inflation, a risk that U.S. Treasury Secretary Scott Bessent is likely aware of. However, Asakawa emphasized that there is no specific discussion on currency matters between Bessent and Japanese Finance Minister Katsunobu Kato in the context of trade talks [1].

The former diplomat also ruled out the possibility of a second Plaza Accord. He cited the need for agreement from China and Europe, which is currently unlikely. Asakawa believes that the notion of leaving currency matters to finance leaders is now embedded within the U.S. administration [1].

The dollar index (DXY), which reflects its performance against a basket of six other currencies, has had its worst first half of the year since 1973, declining by some 11%. So far this year, the dollar has fallen 7.5% against the yen (USDJPY) [1].

Asakawa highlighted that Japan has several cards it can use in trade talks with the U.S., such as pledging to boost investment in the U.S., reviewing domestic car safety standards, and contributing to liquefied natural gas (LNG) projects in Alaska. He advised that these should be presented as a single package rather than incrementally [1].

The article by Stephen Miran on the "Monetizing Primacy" of the dollar further underscores the complexities of U.S. policy towards the currency. Miran argues that the dollar's dominance comes at a cost, distorting currency markets and placing undue burdens on U.S. firms and workers. However, he also acknowledges the strategic importance of dollar centrality, which enables the U.S. to exert financial control over trade and financial transactions [2].

Asakawa's comments reflect a cautious approach to currency policy, emphasizing the need for multilateral agreement and the importance of maintaining stability in the global financial system. The outlook for the dollar remains uncertain, with the U.S. administration grappling with conflicting desires for a weak dollar to spur reindustrialization and a strong dollar to offset inflation.

References:
[1] Reuters. (2025). Japan unlikely to face U.S. pressure to strengthen yen. Retrieved from https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3T61P1:0-japan-unlikely-to-face-us-pressure-to-strengthen-yen-ex-top-fx-diplomat-says/
[2] Phenomenal World. (2025). Monetizing Primacy. Retrieved from https://www.phenomenalworld.org/analysis/monetizing-primacy/