The Asian Development Bank’s (ADB) incoming president indicated that US policy will be a key focus as he monitors its impact in the region with Donald Trump’s return to the White House looming.
“If the US raises tariffs, cuts taxes, restricts immigration, those policies could have a major impact on Japan and other Asian economies through trade and financial markets,” said Masato Kanda, former vice finance minister for international affairs, said in an interview with Bloomberg on Thursday.
Kanda is known for spearheading Japan’s currency policy in recent years and its first yen-buying intervention in decades. He will start his role as ADB president in February.
Additional US bond issuance could drive up yields, potentially exacerbating debt concerns and fueling volatility in the currency market, he said. Higher tariff and export controls may have a direct and significant impact on global trade, he added.
Kanda said he was speaking about these possibilities in general terms and couldn’t comment further given a need to ensure political neutrality.
His remarks come as Trump prepares to begin his administration in January, policy proposals that have already created uncertainty among investors and policymakers around the globe.
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Since winning the presidential election last month, Trump has announced he would impose 25% tariffs on all goods from Mexico and Canada. On the campaign trail, he repeatedly threatened tariffs of 60% on China and universal levies of a lesser degree on the rest of the world.
He has also pledged to slash corporate tax, and deport millions of undocumented immigrants.
Kanda indicated that the emergence of protectionist policies is a risk factor and a potential headwind for Asian economies.
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“The Asian region has achieved remarkable economic growth to date, partly thanks to globalisation,” he said. Among multiple challenges facing Asian nations, Kanda said he’d like to focus on climate action and private sector development.
Kanda was Japan’s point man during the yen’s slide to its lowest levels against the dollar in decades, leading the nation’s communication strategy and making the calls on intervention.
“If there are sudden moves in currencies that go far beyond fundamentals, households and businesses can’t cope,” said Kanda, “That would need to be corrected, whether its in the direction of yen weakness, or yen strength.”
The yen was trading around 149.82 against the US dollar at Friday lunchtime, some distance from the high 150 range where Japan last stepped into the currency market in July.
Kanda said currencies have recently been moving on multiple factors, including interest-rate differentials, as well as geopolitical issues. In recent weeks, news events ranging from the US presidential election to turmoil over South Korea’s short-lived martial law declaration have also buffeted the yen.
Over the longer term, Kanda, currently a special adviser to Japan’s finance ministry and cabinet office, expressed concern about the yen’s decline in value. The currency’s real effective rate has fallen by one-third over the past three decades.
To counter this, Kanda emphasised the urgent need to improve productivity, including steps to improve labour market flexibility.
“In the mid-to-long term, it’s desirable for currencies to move in line with fundamentals,” said Kanda.
