TOKYO- Japan could intervene again to support the yen if it declines further, former top currency diplomat Takehiko Nakao told Reuters on Wednesday, and said the time is right for the Bank of Japan to ditch or modify its ultra-easy policy settings.
The former vice minister of finance for international affairs said prolonged monetary easing risks depreciating the yen further.
“There may be views that the intervention is not imminent as the depreciation has not been so rapid compared to the last time when authorities intervened in September/October,” he said.
“But it’s fully possible the authorities will conduct intervention in case the yen weakens further.”
Japan spent more than 9 trillion yen ($60.88 billion)intervening in currency markets last year to arrest the yen’s decline, buying yen in September and October – first at levels around 145 and again at a 32-year low just short of 152.
The yen is currently trading around 147.77 against the dollar.
Nakao, who served as top currency diplomat from August 2011 to March 2013, oversaw a heavy intervention in 2011 by buying the dollar to stem yen strength in the wake of the U.S. Federal Reserve’s quantitative easing, which made Japanese exports less competitive.
While the situation is reversed now with the yen sharply weaker, the benefits accruing to Japanese exports have been offset to some extent by the dramatic surge in prices of imports and the cost of living. The prolonged monetary easing has also been criticized by investors as distorting markets and hurting bank profits. -Reuters
