US President Donald Trump on Tuesday targeted not only China, but also long-time ally Japan, accusing both countries of devaluing their currencies. The hawkish president has sent a clear signal that he is likely to regard the world's second and third largest economies as currency manipulators.

“You look at what China is doing, you look at what Japan has done over the years, they play the money market, they play the devaluation market and we sit there like a bunch of dummies," remarked Trump when meeting with drug company executives at the White House on Tuesday, with his words making waves in global financial markets.

Since Trump won the presidency, the former real estate mogul has not yet labelled China as a currency manipulator - an action he promised to do from day one during the election campaign. Chinese officials have said time and again that Beijing is not trying to competitively devalue the yuan to stimulate exports and seek a trade surplus, noting that market-determined Renminbi rates and balanced international trade fall within the country's interests. 

The latest remarks by Trump are the first since his inauguration that can be read as a signal that he may go as far as accusing China of manipulating the yuan.

Soon after Trump's remarks were reported, the US dollar weakened sharply against the Japanese yen on Wednesday. By 2 p.m. Wednesday Japan Standard Time, it had recovered to 113.20 from a low in morning trading of 112.08.

"The dollar-yen exchange rate moves in the market. Japan isn't manipulating it," Japanese business journal Nikkei Asian Review quoted Masatsugu Asakawa, Japan's vice minister of finance for international affairs, in response to Trump’s claim. "Japan's monetary policies are for the domestic objective of escaping from deflation," the nation’s top currency official added.

The same stance was voiced by Japan's Chief Cabinet Secretary Yoshihide Suga, who said foreign exchange rates should be determined by the market. Meanwhile Suga promised Japan will continue to make policy in line with Group of Seven and Group of 20 agreements, ruling out competitive currency devaluations.

Trump is set to meet visiting Japanese Prime Minister Shinzo Abe next week at the White House, their second meeting following Trump’s election victory. Trump’s latest remarks now raise the speculation that the exchange rates between the US dollar and Japanese yen would be put on the agenda for discussion.