Financial Times – May 16, 2016 – Yen intervention remains an option for Japan because currency volatility can damage and destabilise the economy, the country’s top currency official has said.
In an interview with Nikkei and the Financial Times on Monday, Masatsugu Asakawa, vice-minister of finance for international affairs, said Tokyo still regards intervening to sell the yen as a legitimate part of its toolkit, despite the US decision to put Japan on its new currency watchlist.
“Japan is not being singled out in the US currency report regarding currency intervention so we do not see this as having an immediate impact on Japan’s currency policy,” Mr Asakawa said.
“What we need to be conscious of is that excessive volatility and disorderly movements will have an adverse impact on economic stability,” he added.
Mr Asakawa’s comments highlight the continued possibility of intervention by Japanese authorities as well as divisions on the role of currency policy ahead of the G7 meeting in Ise-Shima at the end of the month.
Japan’s concerns over yen strength have not been shared by US and other world leaders who agreed during a G20 meeting in February to refrain from competitive currency policies.
Still, Taro Aso, finance minister, has stepped up his rhetoric on currency intervention in recent weeks as the yen surged to the ¥106 level after the Bank of Japan sat pat last month following its move to negative interest rates in January. The yen has since fallen back to the ¥108 level.
The export-denting rise in the yen has cast a shadow over Japan’s economy just as Abenomics is running low on firepower.
Following a steady period of record earnings, the country’s major manufacturers including Toyota and Fanuc have recently warned investors of the sharpest profit declines since Prime Minister Shinzo Abe came to power in late 2012 with a pledge to stimulate growth and boost markets.
Mr Asakawa dismissed doubts in the global markets that central banks are running short of ammunition to stimulate growth, but he conceded monetary policy alone was not sufficient to bolster the economy.
“An imbalance will result if an excessive burden is placed on monetary policy alone. We must not forget the structural policies,” Mr Asakawa said.
On the fiscal front, the government is debating whether to put off a rise in consumption tax from 8 to 10 per cent scheduled for April 2017. Some analysts had speculated Mr Abe may use the upcoming G7 summit to announce the delay, but Mr Asakawa reiterated that Japan was still on track to raises taxes for now.