No yen intervention needed as he stages the takeover, ‘Mr. Yen’ Sakakibara says

MUMBAI, July 29 (Reuters) – Japan does not need to intervene in the currency market as the sharp depreciation of the yen will not continue, due to the changing economic environment in the United States and in Japan, the country’s former chief diplomat. Eisuke Sakakibara said on Friday.

“It could reach 140, and even exceed 140. But I don’t think it would go much further, like 150, 160,” Sakakibara told the Reuters Global Markets Forum (GMF).

Sakakibara, known as “Mr. Yen” for orchestrating several monetary interventions in the 1990s, said the fall in the yen was mainly caused by divergent monetary policies between the United States and Japan.

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“That’s what has happened so far, but things are changing,” said Sakakibara, who is essentially the only monetary diplomat in Japan to have experienced both the interventions of sale and purchase of yen.

Since the start of 2022, the Japanese yen has fallen about 21% to a multi-year low of 139.39 to the dollar on July 14. It has since rallied to 133.42, triggered by a weaker adjustment in US yields that reflects narrowing policy divergence expectations. between the Fed and the Bank of Japan (BOJ), the Mizuho strategists wrote.

The spread between 10-year US Treasury yields and the equivalent Japanese government debt has narrowed by 70 basis points since early June as signs of slowing US growth and rising interest rates pushed Treasury yields lower.

Yen against inflation

Sakakibara said the BOJ may be forced to continue its accommodative monetary policy over the next two years as recessionary pressures build up in the global economy.

However, he does not see this as a “missed opportunity” for the BOJ, whose dovish stance stands out in a recent wave of central bank interest rate hikes to combat soaring inflation.

Sakakibara’s views are closely watched by the markets as he remains in close contact with incumbent policymakers, has experience in monetary intervention and has a knack for interpreting financial authorities’ position on yen movements.

(Join GMF, a chat room hosted on Refinitiv Messenger: https://refini.tv/33uoFoQ)

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Reporting by Divya Chowdhury in Mumbai; Additional reporting by Tetsushi Kajimoto in Tokyo, Savio Shetty in Mumbai and Nishara Pathikkal in Bangalore; Editing by David Holmes

Our standards: The Thomson Reuters Trust Principles.

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