— Bloomberg
Tokyo: Japanese monetary authorities are open to intervening in the currency market “to mitigate the side effects of a weak yen,” a government panel member says, reflecting Prime Minister Sanae Takaichi’s concerns about inflation.
Takaichi’s administration “will intervene more actively in the foreign exchange market, I believe”, Takuji Aida, who is also chief economist at Credit Agricole, said last Sunday during a live broadcast on NHK.
He added that the nation has more than enough foreign reserves, as Japan’s economic situation isn’t dire.
Aida’s comments echo remarks he made last week warning traders that currency intervention could come sooner than many expect.
The threshold of 160 to the US dollar is seen as a line in the sand after authorities bought the yen on several occasions last year after it weakened past that level.
Aida said last Thursday that authorities could step into the market before the yen reaches that level, if currency moves “become sharp”.
After weakening last week to a 10-month low that took it past 157 to the dollar, Japan’s currency drifted a tad higher to around 156.40 as last Sunday, just days after Takaichi unveiled the nation’s biggest fiscal stimulus package since the global coronavirus pandemic in 2021.
Last week’s moves prompted an escalation in verbal intervention from Japanese authorities, with Finance Minister Satsuki Katayama saying last Friday authorities will respond appropriately to excessive currency moves, and currency intervention is an option.
Speculation that Takaichi, known to support reflationist policies, might discourage the Bank of Japan (BoJ) from a near-term rate hike has helped weigh on the currency since she became prime minister in October.
While Aida is also a reflationist, his comments as a member of the premier’s advisory panel reflect the administration’s concern that a weak currency could spur inflationary pressure.
The BoJ will next set policy on Dec 19.
Governor Kazuo Ueda met with Takaichi last week. He said he explained that the central bank is in the process of rolling back the degree of policy easing undertaken by his predecessor, and she understood that description.
Aida also said last Sunday it’s important to invest in artificial intelligence, naval frigates, defence and other sectors even if Japan needs to issue bond to do so.
The new administration will look to balance steady economic growth with efforts to balance inflation, he said. — Bloomberg
