Japan’s government may step into foreign exchange markets again if the yen goes beyond 150 against the dollar with officials likely to get concerned if it reaches 155, according to former top forex official Eisuke Sakakibara.
(Bloomberg) — Japan’s government may step into foreign exchange markets again if the yen goes beyond 150 against the dollar with officials likely to get concerned if it reaches 155, according to former top forex official Eisuke Sakakibara.
“The level is quite important, despite whatever other people might say,” said Sakakibara, who is known as ‘Mr Yen’ for his past influence on the currency. “So that if it goes beyond 150, that may result into some kind of intervention.”
“I can’t specify the number — it depends upon the situation at that moment, but something like 155 is the level at which they would start to worry,” said Sakakibara, who oversaw more than a dozen interventions during his stint as vice finance minister for international affairs between 1997 and 1999.
Sakakibara’s main view is that Japan will try to ride out the yen weakness without intervening as it waits for a change in the policy direction of the Federal Reserve.
The yen has continued to weaken as the dollar gains strength on the back of expectations of US interest rates staying higher for longer. But market players have been wary of testing how far they can push the yen amid repeated warnings from finance ministry officials that no options are ruled out should the currency weaken too quickly.
Japan spent more than $60 billion last year on three interventions just before the 146 and 152 marks.
Sakakibara, the current president of the Institute for Indian Economic Studies, said authorities may have to spend a similar amount or more should they have to step into markets again. Verbal warnings will be more effective once they have stepped in, he said. Without action the yen could approach the 160 mark, but won’t go beyond that, he added.
Still he expects the tide to turn, likely after the Fed’s meeting in December, with a rise in interest rates in Japan also possible next year.
“There’s quite a big possibility that US monetary policy may change in the near future,” he said. “So if that happens then the yen would start to strengthen toward 130.”
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