2024-04-23 11:15:09
Mitsuhiro Furusawa, former finance minister and president of the Sumitomo Mitsui Banking Corporation Institute for International Finance, said that as the yen exchange rate approaches 155 yen to the dollar, he believes the country is very close of a foreign exchange intervention.
In an interview on the 23rd, Mr. Furusawa pointed out: “Even if the interest rate differential between Japan and the United States remains unchanged, the yen is depreciating and the dollar is appreciating quite quickly. » If the depreciation of the yen continues, intervention will be “very close”, he said. Few will benefit from a yen depreciation above 155 yen, and “I don’t think anyone would think it would be a good idea to get out of a situation where speculation continues to increase.”
On the 23rd, the yen temporarily hit a new low of 154.86 yen in about 34 years, as expectations of a U.S. interest rate cut recede and interest rates between Japan and the United States are becoming more aware. In light of concerns over the depreciation of the yen, expressed at a series of international conferences in Washington last week, Finance Minister Shunichi Suzuki acknowledged that “the environment is now ready” for intervention. on foreign exchange, leading to market volatility. increased awareness of the risks of the intervention.
Mitsuhiro Furusawa Former Treasurer
Source: Sumitomo Mitsui Banking Company
Mr. Furusawa believes that foreign exchange interventions will be carried out until the dollar reaches at least 160 yen. Interventions cannot be made to maintain a specific level, but rather when the market tide changes due to new factors such as US economic indicators.
At the first meeting of the finance ministers of Japan, the United States and South Korea on the 17th, a joint statement was issued stating that Japan and South Korea recognized serious concerns about the depreciation of their national currencies and that they would consult closely on exchange rate trends. walk. A statement by finance ministers and central bank governors of the Group of Seven (G7) reaffirmed its previous commitment that excessive fluctuations in exchange rates have a negative impact on the economy.
Mr Furusawa said that since Japan, the United States and South Korea issued a joint statement, it was “hard to imagine that the United States would ask them to stop” when they were actually taking measures, adding that the Japanese monetary authorities were “on the right track”. “watch” before intervening. Isn’t that true?” he said. However, he added, “we did not have a free hand after receiving the statement” and it is likely that a decision will be made based on continued discussions.
Up to two more interest rate hikes this year
Even after the Bank of Japan decided in March to raise interest rates for the first time in 17 years, the yen’s depreciating trend did not change. With monetary policy expected to remain unchanged at this week’s monetary policy meeting, the market remains attentive to whether Governor Kazuo Ueda’s press conference will make a hawkish statement on further interest rate hikes. A Bloomberg survey of economists found that 80% expect the Bank of Japan to raise interest rates again by the end of the year.
Mr. Furusawa stressed that Japan, where real wages remain negative, “does not have an extremely strong economic situation and is not yet in a position to raise interest rates quickly.” However, in addition to expectations of a reduction in income tax in June and an increase in wages due to the spring trade union, if there is a revision of the outlook for the economic situation and prices ( Outlook report) this weekend, a further rise in interest rates that is expected to take place in July. “It happens,” he analyzed. If the economy doesn’t weaken, there will be another one at the end of the year, and at most twice this year.
The consensus is that monetary policy should not target exchange rates, and he added: “It is difficult to say that we will change monetary policy to move exchange rates. »
Mr. Furusawa served as Treasurer from March 2013 to July 2014. Shortly after taking office, in April 2013, a “one-stop monetary easing policy” was introduced, and he worked with the Governor of the Bank of Japan, Haruhiko Kuroda, to overcome deflation. He also served as deputy managing director of the International Monetary Fund (IMF).
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