Japan may sell yen again if rate climbs
Source: Bloomberg News |
August 8, 2011, Monday
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Print Edition
Print Edition
A Japanese Finance Ministry official said the government may sell yen again after last week's move if it sees speculative trades that drive the currency higher.
Further intervention would "maintain the effect and warn those who make unusual moves" in the currency market, Vice Finance Minister Fumihiko Igarashi said on NHK television yesterday.
Japan sold yen in the foreign-exchange market last week for the second time this year to secure an economic recovery following the March earthquake and tsunami. Investors have been buying the currency as a haven from sovereign debt concerns in Europe and the United States, which had its credit rating cut for the first time by Standard & Poor's last Friday.
The government is likely to pursue a campaign of currency intervention that will prove ineffective and the yen may strengthen beyond 70 for the first time, former inistry official Eisuke Sakakibara said.
Japan's currency may trade around 73 per dollar at the end of the year as the government will probably have to sell yen without US support, Sakakibara said on TV Asahi yesterday. Last month, he said the yen may go as high as 75.
Sakakibara became known as "Mr Yen" during his 1997-1999 tenure as the ministry's top currency official because of his efforts to influence the yen rate through verbal and actual intervention in foreign-exchange markets.
Japan acted alone in selling the yen last week, in contrast with a previous intervention in March that was coordinated among Group of Seven nations. The Bank of Japan added 10 trillion yen of monetary stimulus measures last Thursday, hours after the ministry's move.
"There is a good chance speculators will build up yen-buying positions again, depending on future developments, given that the present intervention is unilateral," Goldman Sachs Group Inc economists Naohiko Baba and Chiwoong Lee wrote in a note published last Saturday. "The impact will not be as large or as sustainable as a coordinated intervention."
While the yen dropped as much as 4.1 percent to 80.24 against the dollar when Japan sold the currency last Thursday, it resumed rising the next day, climbing 0.6 percent amid a global stock market rout. The yen closed last week at 78.40.
A stronger yen can erode exporters' overseas earnings when repatriated and reduce their competitiveness. Osamu Masuko, president of Tokyo-based Mitsubishi Motors Corp, was among executives who called for more action after last week's move, saying in an e-mail that the exchange rate "still isn't acceptable."
Baba and Lee said that Japan has been buying US Treasuries when it sells yen, leaving it with more than 30 trillion yen in unrealized losses that will test the government's "true determination" to combat the currency's rise.
Japan trusts the US is able to pay its debts and expects Treasuries to remain an attractive investment, a Japanese government official said yesterday.
Further intervention would "maintain the effect and warn those who make unusual moves" in the currency market, Vice Finance Minister Fumihiko Igarashi said on NHK television yesterday.
Japan sold yen in the foreign-exchange market last week for the second time this year to secure an economic recovery following the March earthquake and tsunami. Investors have been buying the currency as a haven from sovereign debt concerns in Europe and the United States, which had its credit rating cut for the first time by Standard & Poor's last Friday.
The government is likely to pursue a campaign of currency intervention that will prove ineffective and the yen may strengthen beyond 70 for the first time, former inistry official Eisuke Sakakibara said.
Japan's currency may trade around 73 per dollar at the end of the year as the government will probably have to sell yen without US support, Sakakibara said on TV Asahi yesterday. Last month, he said the yen may go as high as 75.
Sakakibara became known as "Mr Yen" during his 1997-1999 tenure as the ministry's top currency official because of his efforts to influence the yen rate through verbal and actual intervention in foreign-exchange markets.
Japan acted alone in selling the yen last week, in contrast with a previous intervention in March that was coordinated among Group of Seven nations. The Bank of Japan added 10 trillion yen of monetary stimulus measures last Thursday, hours after the ministry's move.
"There is a good chance speculators will build up yen-buying positions again, depending on future developments, given that the present intervention is unilateral," Goldman Sachs Group Inc economists Naohiko Baba and Chiwoong Lee wrote in a note published last Saturday. "The impact will not be as large or as sustainable as a coordinated intervention."
While the yen dropped as much as 4.1 percent to 80.24 against the dollar when Japan sold the currency last Thursday, it resumed rising the next day, climbing 0.6 percent amid a global stock market rout. The yen closed last week at 78.40.
A stronger yen can erode exporters' overseas earnings when repatriated and reduce their competitiveness. Osamu Masuko, president of Tokyo-based Mitsubishi Motors Corp, was among executives who called for more action after last week's move, saying in an e-mail that the exchange rate "still isn't acceptable."
Baba and Lee said that Japan has been buying US Treasuries when it sells yen, leaving it with more than 30 trillion yen in unrealized losses that will test the government's "true determination" to combat the currency's rise.
Japan trusts the US is able to pay its debts and expects Treasuries to remain an attractive investment, a Japanese government official said yesterday.
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