Bank of Japan ‘may have to intervene’

Tokyo — Japanese authorities were likely to intervene in the currency market if the yen broke out of a range it had been in for years and fell well below ¥152 per dollar, former top currency diplomat Tatsuo Yamazaki said on Thursday.

Once the dollar climbed above ¥152, the pair’s rise could accelerate and offer an opportunity for authorities to intervene, Yamazaki said. If authorities left such dollar/yen rises unattended, they would put their credibility at stake, he said.

The fact that Japanese authorities had described recent yen declines as driven by some “speculative moves” suggested the authorities were seriously contemplating whether to step in, said Yamazaki, who oversaw Japan’s ¥35-trillion intervention campaign to weaken the currency in 2003-04.

Tokyo was unlikely to face much heat for intervening in the market to prop up the yen as doing so would not put the country’s exports at a competitive advantage against that of other countries, he said.

The yen has been on a downtrend despite the Bank of Japan’s decision last month to end eight years of negative interest rates, as traders interpreted its dovish language as signalling that the next rate hike would still be some time away.

Markets remain on alert for the chance of intervention by Tokyo as the dollar hovers near the 34-year high of 151.975 hit on Wednesday last week.

When the dollar hit that high finance minister Shunichi Suzuki said authorities were ready to take “decisive steps” to counter speculators in the strongest hint that yen-buying intervention could be imminent.

Yamazaki said the Bank of Japan’s lack of confidence in the policy outlook, which was reflected in governor Kazuo Ueda’s dovish message, was likely giving speculators an excuse to sell the yen. Ueda should have said more clearly that the bank would raise interest rates at least once more this year, to keep yen bears at bay, Yamazaki said.

Reuters