Trump Pivots Back to Iran Diplomacy
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What is the main topic discussed in this episode?
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As President Trump pivots back to diplomacy after toning down fresh threats to strike Iran, we'll look at one Gulf ally starting to question the logic of basing American troops on its territory.
They like to have the U.S. there as a kind of visible deterrent. Although it has to be said that it hasn't quite served that purpose in this conflict. Since the U.S. began the attack, it has turned it more into a target than a deterrent.
Plus, the U.S. steps in to help Japan boost the weakening yen. And California's proposed billionaire tax gets a backing from the state's Democratic Party. It's Monday, August 3rd. I'm Luke Vargas for The Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. For the first time since the late 90s, Japan and the U.S. are intervening to boost the yen. That is, after the currency hit a 40-year low against the dollar last month, a depreciation that had gathered steam as investors flocked to the dollar amid tensions in the Middle East. Given that the last time Washington and Tokyo worked in concert to buy up the yen was at the height of the Asian financial crisis in 1998, I asked Journal Tokyo Bureau Chief Jason Douglas if that means we're in a similar crisis point.
The weakness of the yen, there's a bunch of factors behind it. Some of them are investor anxieties around things like fiscal policy, around debt levels in Japan, around inflation. But there are also other factors. You mentioned the strong dollar. So, you know, one thing we've seen a lot of is money fleeing Asia and to go into AI stocks in the US, right? There's this colossal AI boom, and that is a factor that's weighing on all Asian currencies and not just the Japanese yen. So the weakness has much more to do with these idiosyncratic factors that we're seeing at the moment, and there's no sort of sign of any broad crisis in the same way that there was in the late 1990s.
While the yen is rising in response to the latest intervention, Jason told me that boosting the currency over the long haul won't be easy.
The Japanese have intervened by themselves solo a couple of times over the last year or so, most recently in April and May, defending the yen. And what we saw was the yen just drifted right back to where it was before that.
Why did President Trump pivot from threats to diplomacy with Iran?
It's important to understand what modern currency interventions are for. I don't think it's right to think of them as definitively changing the direction of a currency. That's not really what this is about. Japan is a huge importer of oil and energy from the Middle East. It is a big problem for them if the yen sinks so far that it pushes up their import bill for energy. So by putting a floor on the yen, they're kind of putting a cap the price that they have to pay for energy at this moment, which is really important. And to see a durable change in the direction of the currency, we probably have to see some changes in the Japanese economy. But as we see interest rates increase, if we see growth pick up, if we see some of the fruits of the investment plans that the current administration has in train begin to appear, then perhaps yen weakness won't be as profound.
President Trump has once again backed off ordering a major strike on Iran just hours after saying he was prepared to launch the biggest attack since World War Two. Instead, Trump was talked down by U.S. allies, including Saudi Crown Prince Mohammed bin Salman, who urged a de-escalation of the crisis.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:00–2:40
2
Why did President Trump pivot from threats to diplomacy with Iran?
2:40–6:19
3
Why did Washington and Tokyo intervene to prop up the Japanese yen now?
6:19–8:34
4
What factors explain the yen’s weakness and can intervention produce lasting gains?
8:34–14:42
Speakers
4 identifiedMore from WSJ What’s News
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