U.S. President Donald Trump has repeatedly accused Japan and China of weakening their currencies — the yen by monetary policy and the yuan by market intervention, respectively — at the sacrifice of American jobs. The United States will discuss the issue at the coming U.S.-Japan bilateral economic dialogue. Although I think that Trump's argument has an element of truth, it is wrong for the U.S. to dictate Japan's monetary policy. How should Japan respond?
Shinzo Abe as prime minister-elect told Wall Street Journal on Dec. 23 , 2012, that he would favor expanding the monetary base to weaken the yen to a 90-yen level to the dollar as a defense to the yen appreciation caused by the U.S. quantitative monetary policy.
Kikuo Iwata, on March 5, 2013, prior to his appointment as the Bank of Japan's vice governor, explained in details the process of how an increase in the monetary base would lead to yen depreciation via inflation expectations. In fact, the yen fell from 80 to the 100 yen level to the dollar as the BOJ implemented the quantitative qualitative monetary easing in April 2013. And again the yen fell to a 120 yen level as the BOJ expanded the monetary base further in October 2014.