Trump's Tariffs Are Back And The Timing Couldn't Be Worse For Asia

All this means Tokyo officials“have definitely put 160 in neon as a level” to watch for fresh yen-buying efforts, notes Bart ​Wakabayashi, strategist at State Street. Brent Donnelly, president at analytics firm Spectra Markets, adds that intervention odds“click substantially higher if 162 trades.”

The problem is that Japan gets at least 95% of its oil from the Middle East. The longer oil trades near $100 a barrel, the more Asia's second-biggest economy is at risk of importing even higher inflation. Food prices, too, are expected to tick higher in the months ahead, even if the Strait of Hormuz is reopened in short order.

This dynamic is exacerbated by the weak-yen policy Japan has pursued since the late 1990s, especially since 2013 under then-Prime Minister Shinzo Abe, Takaichi's mentor.

“The war in Iran not only directly raises global commodity prices but also puts downward pressure on the yen,” notes economist Richard Katz, author of the Japan Economy Watch newsletter.

Katz adds that Japan's“foodflation is caused not only by rising commodity prices in global markets but also by the sharp depreciation of the yen triggered by the monetary 'arrow' of Abenomics.”

As Katz points out,“food is highly import-intensive, from food itself to feed grains, energy, fertilizer, etc. Depending on how long the Iran standoff lasts, prices will take another hit. It's not just energy but also petrochemicals.” Katz points to Zen-Noh, the farm cooperative, saying it will likely raise fertilizer prices 14% for the autumn planting.

But the yen isn't even Asia's most dramatic currency story right now. That distinction belongs to Indonesia, where the rupiah crashed past 18,000 per dollar for the first time this week, thrusting Southeast Asia's largest economy into global headlines for all the wrong reasons.

Weak current account figures and budget concerns had already rattled investors. What's accelerating the selloff is something more corrosive: a systematic assault on Bank Indonesia's independence.

Indonesian President Prabowo Subianto has been chipping away at the central bank's autonomy since taking office in October 2024. The first major blow came in September 2025, when he ousted Finance Minister Sri Mulyani Indrawati - the former World Bank managing director who had long been seen as the primary check on fiscal overreach.

Now parliament has approved an amendment expanding BI's mandate to encompass economic growth, effectively opening the door to political interference in monetary policy.

The danger, as economist Yose Rizal Damuri of the Centre for Strategic and International Studies warns, is that government meddling in rate decisions becomes normalized - routine, in his word. Caught between a weakening currency and a weakening institutional framework, Bank Indonesia is now scrambling to stabilize both.

In Mumbai, the Reserve Bank of India is engaged in an intense battle with currency speculators as the rupee falls to all-time lows. While“inflation pressure is building,” the“bigger concern is external stability,” says economist Gaurav Ganguly at Moody's Analytics.“A weaker rupee, higher oil prices, and current account pressure have pulled foreign exchange management to the center of the policy debate.”

In 2025, the rupee's 5% decline made it Asia's worst-performing currency. Less than six months into 2026, the rupee is already down 6.5%, despite aggressive RBI intervention. All this challenges the“Goldilocks moment” spin that Prime Minister Narendra Modi's Bharatiya Janata Party promulgated at the start of the year. If Indian growth and inflation were really as perfectly aligned as Modi claims, the exchange rate wouldn't be in freefall.

Enter new US tariffs, which are sure to ratchet up the tension for Asian markets.

US officials are struggling to explain why tariffs are bursting back onto the scene. US Trade Representative Jamieson Greer argues that current global conditions“create a dynamic where American workers are forced to compete globally on an unlevel playing field. We will no longer tolerate this disparity.”

Yet many key US allies have been quick to register their displeasure. The EU slammed the new tariff as“unjustified.” Australia's trade ministry said that“any tariffs on Australian exports to the United States are unjustified and inconsistent with our free trade agreement.”

Nor is Japan's government happy about facing a 12.5% US tariff.“The tariff policies of the second Trump administration are creating significant uncertainty in the global economy,” says Toshihiro Okubo, economist at Tokyo's Keio University.“The imposition of additional tariffs and reciprocal duties is undermining the stability of the multilateral free trade system and forcing countries to respond to it.”

Okubo explains that Japan's globalization has followed a different path from that of Europe and the US, thanks to an aging population and a declining birthrate.

“Maintaining free trade, promoting inward investment, and redesigning labor mobility all involve balancing economic rationality with social acceptability. Amidst a shaky global economy, Japan should pursue neither extreme openness nor isolation, but rather a sustainable globalization strategy shaped by thorough deliberation.”

There's a further wrinkle, notes Madeline Chalecki, economist at the Atlantic Council's GeoEconomics Centre: what happens to the earlier tariff deals Trump struck under the International Emergency Economic Powers Act?