00:00Look at the yen over the last couple of years. It's been a story of weakness where Japan is
00:05under considerable pressure, at least from the U.S., to do something about its currency.
00:09I want to bring in now Ken Weinstein. He is Japan chair over at the Hudson Institute. And
00:13Ken, we asked you to come in today because Scott Best and the Treasury Secretary stopped in Japan
00:19on his way to China. And he spoke with the finance minister there about exchange rates,
00:25the U.S. dollar, Japanese yen exchange rate, and basically confirmed that they're on the same
00:31page in viewing excessive moves as undesirable. There's been a lot of talk about Japanese
00:36intervention in the currency markets. What do investors need to understand about
00:41Best's take on Japan's economy and on Japan's exchange rate?
00:46Yeah, delighted to be here. Look, Scott Best is one of the most astute observers of Japan,
00:50certainly the most astute observer of Japan we've ever had as Secretary of the Treasury. He is
00:54this was his 54th visit to Japan. This is a man who has lived in Japan for months at a
01:01time. This is
01:02a man who understands Japan, understands how its economy operates, how its central bank operates. He
01:09goes back a long ways with a lot of Japanese officials, but also knows the governor of the central
01:16bank, Governor Ueda. When Ueda was a professor in the United States, there is a long history. He has a
01:24very subtle understanding of both the political, financial pressures involved. And Japan is in a
01:31difficult situation. I think that the weakness of the yen is, it is massive pressure on Japan. It's a
01:38pressure on consumers. It's a pressure on industry. And he certainly wants to
01:47avoid excessive volatility, as the as he mentioned yesterday, in in where the yen is. But he also I
01:56think he understands that at some point, the Bank of Japan is going to have to is going to need
02:00to
02:00raise interest rates in order to battle inflation in Japan. So it's it's it's Japan is in a difficult
02:07situation. Yeah. And Bessent is trying to do what he can to signal understanding Japan, certainly to
02:14help avoid excessive volatility. But it's a it's a challenging position for the Japanese as well.
02:20Do we know what influence the Japanese have over this administration? Because as you mentioned,
02:26they are facing a lot of pressure from a lot of areas, particularly from the war and their energy
02:31prices. Do we know what kind of influence they have? Look, I'd say this, I think of all of our
02:37allies. Japan is arguably among the Western allies, the most important economically to the United
02:43States. Japan has pledged to invest $550 billion in this investment fund. The relationship between
02:49the president and Prime Minister Takeichi is extraordinarily strong. It is warm. And so
02:57I think there's there's deep mutual understanding. Certainly, you know, with the Japanese, like the rest of
03:05our allies were not tipped off in advance of, right, of the attacks on Iran. And so, you know,
03:12so the question, you know, and I think the Japanese are, they have also had historically strong ties to
03:17Iran. There's some speculation, the Iranians, the Japanese might be able to play some role as a kind
03:23of mediator in the war. I don't, I haven't seen steps on that. There also is deep concern in Japan
03:30with
03:30the president's trip to China at a time of tensions between Japan and China, that the U.S. may
03:37somehow make concessions against Japanese national interests. I think that is extraordinarily unlikely.
03:42The president understands the importance of the U.S.-Japan alliance. It was the major priority for his
03:48foreign policy in the first term. It's a significant priority now.
03:52You were nominated by President Trump in March 2020 to be ambassador to Japan. What is the state
03:58of the relationship between the U.S. and Japan now in 2026, especially as the president looks for
04:04allies in the region, not to team up against China, but to certainly as an offset to China's rising power
04:11in the region? Look, Japan has taken some extraordinary steps since 2020. Since I was
04:16nominated to be ambassador, they have reached their goal of 2 percent of GDP spending on defense.
04:24They are now becoming a global defense exporter. Later this year, they're going to come out with
04:31their three major strategic doctrines in which Japan will present its positive contribution to security,
04:43proactive contribution to security, which is how Prime Minister Takenichi likes to talk about it, that
04:48security is critical and that Japan is moving from being dependent on the United States to becoming
04:55a security provider in the region. Japan has become a defense exporter. They've just signed a big deal
04:59with Australia to sell frigates. They're sending defense equipment to the Philippines and elsewhere.
05:05So Japan is now acting very much like a much more normal nation. They're looking also at
05:12constitutional reform to change the famous article nine of the Japanese constitution,
05:17which the United States imposed on Japan after the war, which essentially the language is it was not
05:24well phrased. It prevents Japan from having standing armies, which it obviously needs. And instead,
05:30Japan talks about its self-defense forces. But that language, the prime minister has said,
05:34she really wants to focus on constitutional reform in the next couple of years. It's a big priority for
05:39it would be a major step for Japan. And Japan is also deepening its ties to our allies. Japan is
05:45working with the Brits and the Italians on a sixth generation global combat aircraft program
05:52and has been deepening ties with nations in Europe, both on the defense side, but also on the trade side.
06:00The Trans-Pacific Partnership, which Shinzo Abe kept in place after the United States stepped out,
06:07now includes Great Britain. There's increasing talk about the European Union and Japan cooperating
06:12more deeply on trade measures. And perhaps the EU, though it's unlikely the EU would join the
06:18Trans-Pacific Partnership, it could adopt many of the standards that in the CPTPP is global standards.
06:24So Japan is starting really to become a nation that thinks of itself as a major diplomatic player.
06:32It sees itself as a bridge to Europe, as a bridge to the developing world for the United States,
06:36but understands that the U.S.-Japan alliance is the sine qua non of anything that Japan does.
06:4230 seconds left. What's the relationship between Japan and China?
06:45It is complex.
06:47I gave you 30 seconds.
06:48Yeah. Look, it's complex. My own sense is this, that the Chinese government sees what Japan is doing.
06:55Takeichi was not the person they wanted as prime minister. She is a defense hawk. She is close to Taiwan.
07:00She has reshaped the Japanese government. She removed Komeido, which was the 26-year partner
07:05of the Liberal Democratic Party. Komeido is a pacifist party with strong ties to China.
07:09She replaced them with the conservative populist Isshin Japan Restoration Party.
07:14That party shares Takeichi's view on defense. They're trying to put economic pressure on her.
07:19They criticized the statement she made in the Diet about a Taiwan contingency effectively
07:24being a national emergency for Japan. And they really went after her.
07:30The president of the U.S.-Japan
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