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‘M. Yen says Japanese currency could plunge to 170 next year

A dealer reacts in the trading room of FX brokerage Gaitame.Com Co. in Tokyo October 21, 2022. The yen’s fall past the symbolic 150 mark against the dollar leaves traders guessing when authorities Japanese will intervene to stop a further decline .

Toru Hanai | Bloomberg | Getty Images

The Japanese currency could weaken even further to 170 against the US dollar next year, according to Japan’s former deputy finance minister for international affairs, Eisuke Sakakibara.

Sakakibara, known as “Mr. Yen” for his efforts to influence the currency’s exchange rate through verbal and official interventions in the late 1990s, said he expects the currency depreciates further as it approaches its lowest levels in 32 years.

Commenting on reports of another intervention by officials late last week, Sakakibara said: “Most business people now expect further depreciation of the yen. 170 is well within the range. reach,” speaking on CNBC’s “Street Signs Asia.”

Japanese officials last publicly confirmed taking direct action to defend the currency in September, when they reportedly spent a record 2.8 trillion yen ($19.7 billion) to stem the sharp decline in the currency. yen, according to Reuters. The currency started to weaken again to cross a key psychological level of 150 in a month.

Sakakibara’s forecast for the yen comes as Japanese officials remain tight-lipped on public confirmation of a second ongoing intervention to defend the currency.

Easy position for now

Finance Minister Shunichi Suzuki reportedly said on Tuesday that the central bank’s easing of monetary policy and foreign exchange intervention were not contradictory.

“Monetary easing aimed at sustained and stable price increases, including wage growth, and monetary intervention in response to excessive market movements, are different in terms of policy objectives,” Reuters reported, according to Suzuki.

A majority of economists polled by Reuters expected no change in the country’s accommodative monetary policy at its next meeting scheduled for Thursday.

Twenty-five of 28 economists surveyed said the Bank of Japan is likely to maintain its current stance until the second half of 2023.

A policy change in 2023?

Sakakibara added that he expects the Bank of Japan to start raising interest rates under continued inflationary pressures “sometime later next year” – once the bank’s governor’s term ends. central Haruhiko Kuroda will expire in April 2023.

“After the Bank of Japan’s change of government, if the Japanese economy is overheating, there could be a shift in their monetary policy from easing to tightening,” he said. “I expect the tightening to happen at the end of next year,” adding that such a change in policy could come in the form of one or two rate hikes.

“It depends on the state of the economy next year, as expected, if there is an overheating of the economy, which is quite possible, then the Bank of Japan will probably raise interest rates. interest,” he said.

“A history of failed interventions”

Even if authorities continue to intervene to defend its currency, it won’t have much effect, Sakakibara said.

“I think the authorities know that the intervention itself is not that effective,” he said.

Japanese authorities do not deny the limited impact of direct foreign exchange intervention, according to BK Asset Management.

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“The Bank of Japan and the Ministry of Finance have a history of failed interventions – we know that, they know that,” Kathy Lien, the company’s managing director of FX strategy, said shortly after the yen hit. crossed the 150 mark against the US dollar and in front of the media. outlets reported that a second intervention had taken place.

“The only time response efforts really worked was when it was joint responses with other G-7 countries,” Lien said.

Referring to the Bank of Japan’s monetary policy meeting scheduled for next week, Lien said a rate hike would be more effective in defending the yen.

“What they really need to do is raise interest rates,” she said. “Between yen weakness and rising bond yields, it’s really testing that 10-year yield cap by a quarter of a percent.”

“They’re running out of options at this point,” Lien said. Policymakers have ruled out such a move to support the currency.


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