🇺🇸✍️ Trump's Handwritten Message to the Fed: Why Startups Should Pay Attention
Today, President Donald Trump made headlines by personally sending Federal Reserve Chair Jerome Powell a handwritten chart — complete with a scathing note — demanding ultra-low interest rates in the U.S. He posted the chart publicly, comparing America’s benchmark interest rate to those of other countries and highlighting one key fact:
The U.S. has one of the highest interest rates among developed nations.
In the chart, Japan sits near the bottom with a 0.5% rate, where Trump mentioned where the interest rate should be drop from the current 4.5%. Trump’s message? The Federal Reserve is costing "the USA a fortune.” And in many ways, he’s not wrong — especially if you’re a startup founder.
Let’s unpack what this means.
🔍 Japan’s 0.5% vs U.S. 4.5% — Why It Matters
In the world of finance, interest rates function like gravity. A 0.5% rate in Japan signals low-cost borrowing, sluggish economic growth, and cautious investment. In contrast, the 4.5% rate in the U.S. is considered tight — and it deeply affects how capital flows through the startup ecosystem.
Defining the risk premium at 12-15% that comes at startup investment that is inherently risky.
Here’s the key difference:
| Metric | Japan | U.S. |
|---|---|---|
| Central Bank Rate | 0.5% | 4.5% |
| Safe yield on bonds | ~1% | ~5% |
| Required VC return | ~10–12% | 20–25% |
| Typical startup valuation pressure | Low | High (down rounds common) |
🚫 What High Interest Rates Mean for Startups
1. Capital Becomes Scarce
Startups depend heavily on venture capital — and VC funds raise money from limited partners (LPs) like pensions and endowments. When interest rates rise:
- LPs shift capital to safe 4.5% Treasury bonds
- VC firms find it harder to raise funds
- Fewer startups get checks, and those that do must accept lower valuations
2. Higher Return Expectations = Harder Targets
A Japanese LP earning only 0.5% on bonds is happy if a startup fund returns 12% annually.
But a U.S. LP now expects 20–25% annualized return to even consider the same startup.
That means:
- VC funds can back only moonshot startups
- Founders face much higher scrutiny
- “Nice-to-have” products get left behind
3. Startup Debt Gets Expensive
Some startups rely on venture debt or revenue-based financing. A 2–4% interest rate on debt (in a low-rate world, like Airbnb’s credit card days) was manageable.
Now?
- Many startups face 10–12%+ interest rates on debt.
- Monthly burn skyrockets.
- Runway shortens, and pressure to break even intensifies.
🧠 Real Impact: A Seed-Stage Example
Let’s say you're raising $500,000 for a SaaS startup:
| Scenario | Low-Rate World (Japan-style) | High-Rate U.S. |
|---|---|---|
| VC required return | ~12% | ~25% |
| Valuation multiple | 10–12x ARR | 5–7x ARR |
| Suggested valuation | $5M pre-money | $2.5M–3.5M pre-money |
| Equity given up | 10% | 15–20% |
➡️ Same product, same team — but you give up twice the equity just because capital is tight.
🇯🇵 So Is Japan Better for Startups?
Not necessarily.
Japan’s 0.5% rate makes capital cheap, but the startup ecosystem is smaller and more conservative. Risk appetite is lower, exit opportunities are limited, and government plays a larger role in funding.
But it does mean Japanese startups (and VCs) can survive with lower return pressure, which sometimes allows for longer-term thinking. This allows more room for deep-tech startups.
🎯 Conclusion: It’s Not Just a Trump vs Powell Drama — It’s About the Whole Startup Engine
Trump’s call for 1% interest might sound political — but under the surface, it reflects a real tension in the U.S. economy:
High interest rates favor safe assets and established players
Low rates make room for risk-taking, innovation, and startups
For founders, the interest rate isn’t just macro noise. It’s the cost of oxygen in the venture capital world.
When the U.S. runs at 4.5% and Japan at 0.5%, the startup gravity is simply heavier in America — and only the strongest can break orbit.