Why The Dollar Climbed Higher Against The Yen after Donald Trump Won the Election:
- Miguel Virgen, PhD Student in Business
- Nov 9, 2024
- 2 min read
Updated: Mar 12
The rise of the U.S. dollar against the Japanese yen following Donald Trump’s victory in the 2024 U.S. presidential election was driven by several key economic and market factors:
One of the primary drivers behind the dollar's rally against the yen after Trump's win was market optimism regarding his proposed pro-business, pro-growth economic policies. Trump's campaign promises included significant tax cuts, deregulation, and infrastructure spending—all of which were seen as potentially boosting U.S. economic growth. The anticipation of a stronger U.S. economy led to expectations that the Federal Reserve might raise interest rates more quickly, increasing the attractiveness of the U.S. dollar.
Trump’s victory raised expectations that the U.S. Federal Reserve would begin tightening monetary policy to accommodate a potentially stronger economy. This meant higher interest rates, which generally leads to a stronger dollar because higher rates make U.S. assets more attractive to investors, boosting demand for the currency. On the other hand, Japan, with its long-standing policy of low or negative interest rates, was expected to continue a loose monetary policy, which would weaken the yen relative to the dollar. The dollar, seen as a safe-haven currency during times of global uncertainty, was also boosted as part of this risk-on move. The yen, conversely, tends to strengthen in times of uncertainty or financial market volatility because it is considered a safe-haven currency. But with the Trump win, investors moved away from the yen as they became more optimistic about the U.S. economy's prospects under the new administration.
Japan’s Economic Challenges
Even before Trump's victory, Japan's economy was facing several long-term challenges, including low growth, an aging population, and a reliance on a loose monetary policy by the Bank of Japan (BoJ). The BoJ's aggressive monetary stimulus measures were designed to stimulate inflation and weaken the yen to support Japanese exports. However, with the U.S. economy anticipated to strengthen under Trump, the divergence in economic performance between the U.S. and Japan supported a stronger dollar relative to the yen.
The rise of the dollar against the yen after Donald Trump’s election was largely driven by expectations of stronger U.S. economic growth, potentially higher interest rates, and a more favorable economic environment in the U.S. relative to Japan. The combination of these factors led to a shift in investor sentiment, with the dollar benefiting and the yen weakening in response to the perceived policy changes and economic outlook under Trump's presidency.
Boost your business operations with our expert Marketing Services, Call Center Solutions, and Virtual Assistant Support. Whether you need to increase sales, enhance customer service, or streamline daily tasks, we’ve got you covered. Let’s take your business to the next level. Browse the services we offer to see how we can help your business grow.
Keywords:
Economics explained, Economic theories, Economic indicators, International trade theory, GDP and economic output, Income inequality and economics, Sustainable economic development, Global financial markets, International economic relations, Trade and development economics, Learn economics online, Study economics, Economic analysis for business owners, Economics articles for students, Current economic issues explained.
