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Japan Will Prop Up Yen Until Freefall Risk Fades: Ex-BoJ Chief

Former foreign exchange division boss says Tokyo’s prime motivation is to prevent speculators sparking a currency meltdown

Japanese officials are estimated to have spent about $6bn on Monday propping up the currency.
Japanese 10,000 yen notes are seen lined up in Tokyo, in this February 28, 2013 image. File photo: Shohei Miyano, Reuters.


Japan will continue to intervene to prop up the yen until the risk of a speculator-driven collapse has been eliminated.

That’s the view of a former central bank official who was involved in Tokyo’s market interventions a decade ago.

The yen jumped on Thursday on what traders suspect was the second day of intervention following a similar move on Monday to stem the currency’s sharp declines.

Japan’s Ministry of Finance has declined to confirm whether it had stepped in, leaving markets on edge over the chance of another bout of intervention.


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Atsushi Takeuchi, who headed the Bank of Japan’s foreign exchange division when Tokyo intervened back in 2010-2012, said Japan probably stepped into the market on Monday because of the sudden, big loss the yen suffered over a short spell that day.

“If you leave a sudden 2-3 yen move in a single day unattended, you risk triggering a yen freefall that heightens anxiety over the yen and the broader economy,” Takeuchi said.

By intervening when the yen’s decline accelerates over a short period, authorities can maximise the psychological impact by keeping traders on guard over the chance of more action, he said.

“Authorities will continue to intervene for as long as needed to ensure they accomplish their mission, which is to prevent speculative trading from causing a yen freefall,” he said.

Members of the Group of Seven of advanced economies, including the United States, are unlikely to complain even if Tokyo keeps intervening, as long as the moves are focused on addressing rapid, speculative yen moves, he said.


Japan’s Foreign Reserves

Takeuchi brushed aside concerns of some market players that there were limits to how much of its $1.29 trillion worth of foreign reserves Japan can use to intervene because some of its US Treasuries holdings could be hard to sell.

“The whole point of Japan holding such huge foreign reserves is to prepare for cases like now, when it needs to intervene,” Takeuchi said, stressing that the government did not invest in assets with low liquidity that are difficult to sell.

“It’s true authorities need to be mindful of the market impact when selling assets to fund intervention. But the US Treasury market is huge, so it shouldn’t be a problem.”

Japan has historically focused primarily on preventing sharp yen rises that hurt its export-reliant economy. Takeuchi took part in several yen-selling interventions from 2010 to 2012. He is now chief research fellow at Ricoh Institute of Sustainability and Business.

Under Japanese law, the government holds jurisdiction over currency policy, while the BOJ serves as an agent of the finance ministry, which decides when to intervene.


  • Reuters with additional editing by Sean O’Meara


Read more:

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China’s Yuan Leapfrogs Yen in Global Payments Rankings – FT

Yen, Inflation Stresses ‘Could Force BoJ to Tighten This Year’

Japan’s Nikkei Jumps, While Yen Stabilizes After Official Warning

Japan Silent on Yen Intervention as Currency’s Slide Continues



Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.


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