Japanese authorities could intervene if yen It falls to 155-160 against the dollar, according to former top exchange official Eisuke Sakakibara.
The Bank of Japan’s decision on Tuesday to exit the world’s last remaining negative rate regime triggered a sell-off in the Japanese currency as governor Kazuo Ueda reiterated that monetary conditions will remain accommodative for the time being given the fragile recovery of the Japanese economy. It also did not commit to maintaining a terminal charge level.
On Wednesday, ahead of the U.S. Federal Reserve’s interest rate decision later in the day, the yen hit its weakest point in four months against the dollar, falling to around 151 and tumbling. against the euro at the lowest level since 2008.
“155,160 is a bit excessive. If that happens, they might step in,” Sakakibara, who is currently president of the Institute for Indian Economic Studies, told CNBC on Wednesday. He was referring to Japanese authorities, such as the Ministry of Finance.
He expects the yen to strengthen to 130 by the end of this year or early 2025, saying the period of deflation is over. “The period of inflation is imminent,” Sakakibara said.
Nicknamed “Mr Yen”, Sakakibara is known for his influence on the yen in the late 1990s during his tenure as Japan’s vice minister of finance and international affairs.
Eisuke Sakakibara, former vice minister of finance of Japan, in Tokyo, Japan, Thursday, July 6, 2023. He is known as “Mr. Yen” for his ability to influence the currency during his tenure as vice minister of finance of Japan since 1997 to 1999.
Shoko Takayasu | Bloomberg | Getty Images
Decades of accommodative monetary policy in Japan – even as other global central banks have tightened monetary policy in the past two years – have concentrated carry trades in the Japanese yen.
The wide difference in interest rates between Japan and the United States and elsewhere in the world kept the yen weak as investors borrowed cheaply in Japan and bought assets in a currency that produced higher returns .