On May 7, 2022, Japanese media reported that US President Biden had stated that "Japan's avoidance of foreigners is the reason for Japan's economic recession." In response, Chief Cabinet Secretary Matsuno said at a press conference that he regretted Biden's remarks, which stemmed from a lack of understanding of Japanese policy, and that he would explain the Japanese government's position to the US side again. The remarks appear to be related to the Biden administration's economic policies, known as Bidenomics.

Bidenomics aims to overcome two crises: the novel coronavirus and deteriorating employment. Specifically, it plans to pursue policies such as expanding fiscal spending, raising corporate taxes, raising the minimum wage, investing in infrastructure, and implementing the "Buy American" policy (preference for American products). If these policies are implemented, it is expected that the US fiscal deficit will widen, leading to a decline in bond prices and a weakening of the dollar.

Professor Carter of Princeton University has presented research findings that a 1% increase in government spending leads to a 1.6% increase in GDP. According to this, the Biden administration's policy of expanding fiscal spending is expected to help in economic recovery. However, if this leads to a weakening of the dollar and an appreciation of the yen, it could place a significant burden on the Japanese economy.

The Nikkei Research Center, in fact, estimates that a significant depreciation of the dollar and appreciation of the yen will occur, from 1 dollar = 106 yen as of July-September 2020 to 1 dollar = 97 yen in the future, considering government debt and real interest rates. This coincides with the dollar weakness trend expected as a result of Bidenomics.

The Japanese government needs to prepare for these exchange rate fluctuations. In his policy speech at the 204th session of the Diet, Prime Minister Suga presented a new growth strategy focused on the "green" and "digital" sectors, but has been criticized for lacking concrete policies. If the yen appreciates, Japan's external competitiveness is bound to weaken, so it is urgent to find solutions to overcome this.

Meanwhile, President Biden and Prime Minister Kishida held a summit meeting on May 10, confirming the strengthening of defense cooperation between the two countries, as well as strengthening cooperation in various areas such as economic security and space. They also expressed their opposition to China's unilateral attempts to change the status quo. It appears important for Japan to resolve concerns about Bidenomics and minimize economic risks through close coordination with the Biden administration.

In summary, the Biden administration's economic policies have a high possibility of leading to a weakening of the dollar and an appreciation of the yen. The Japanese government needs to take preemptive measures to minimize the side effects of this. It is also expected to be desirable for both countries to coordinate measures against exchange rate fluctuations, following the agreement on strengthening economic cooperation at the US-Japan summit.