Due to 'Trump Tariffs'... Yen Plunges by 1 Yen per Dollar in 30 Minutes

On the 21st, the Tokyo foreign exchange market saw an unusual movement as the yen-dollar exchange rate surged by 1 yen (yen depreciation) in just 30 minutes. This was due to the market's confusion over tariff-related remarks by President Donald Trump, who returned after four years. The Nihon Keizai Shimbun observed, "Just like during President Trump's first term from 2017 to 2021, scenes of market turbulence following presidential remarks are expected to increase."

The yen-dollar exchange rate fluctuated significantly in the foreign exchange market on the 20th and 21st. Initially, on the 20th in the New York market, news spread that "President Trump will announce his vision on trade on his first day in office, but new tariffs will not be imposed immediately." This led to a sharp decline in the dollar against various currencies, as the possibility of a recurrence of U.S. inflation due to tariffs seemed low.

This trend continued in the Tokyo foreign exchange market on the morning of the 21st. Around 9:20 AM, the yen reached its highest value in a month at 154.90 yen per dollar. The market reacted with "The first day will focus on immigration measures, with no mention of tariffs. Trump's first day ended quietly."

The trend changed around 9:50 AM when President Trump mentioned in a press conference that he is "considering imposing a 25% tariff on Mexico and Canada on February 1st," which spread dollar buying. Tariffs act as an inflation factor, and the longer U.S. interest rates remain high, the more attractive the dollar becomes.

The yen-dollar exchange rate rose to 156.24 yen per dollar just before 10 AM (yen depreciation), surging by about 1.3 yen in just 30 minutes. After the sharp rise, the yen-dollar exchange rate fell again, moving in the 154-155 yen range in the afternoon. Hiroshi Suzuki, chief foreign exchange strategist at Mitsui Sumitomo Bank, pointed out, "We cannot take our eyes off President Trump's remarks," and "high volatility is expected to continue this week."

The next focus is whether the Bank of Japan will raise its benchmark interest rate. The Nikkei Index closed slightly higher that day. Many expect that the fact that President Trump's conference did not lead to a sharp drop in the Nikkei Index will be favorable for the Bank of Japan's interest rate decision. As of the morning of that day, the market-reflected probability of a rate hike at the financial policy decision meeting on the 23rd-24th rose to the 90% range from the mid-80% range the previous day.

Tokyo Correspondent: Kim Il-kyu