BOJ will be ‘alarmed’ if yen exceeds 130 per dollar, says ex-deputy minister

The Bank of Japan will be “alarmed” if the yen falls above 130 per dollar, said Japan’s former deputy finance minister for international affairs Eisuke Sakakibara.

The yen traded at 123.77 per US dollar in Asia on Wednesday morning.

The Japanese currency fell more than 5% against the greenback in March, despite the yen being traditionally viewed as a safe haven. Still, the yen took a hard knock as geopolitical turmoil, such as the war between Russia and Ukraine, swept through global markets.

The yen’s weakening comes amid expectations that the Bank of Japan would be slower than other central banks in tightening monetary policy.

While its global counterparts, such as the US Federal Reserve, have begun raising interest rates and are expected to take more aggressive measures to contain inflation, the Bank of Japan has continued its massive stimulus.

The yen’s current levels against the greenback won’t be a problem, said Sakakibara, previously dubbed “Mr. Yen” when he led multiple currency interventions in the 1990s. He pointed out that the dollar yen traded between 120 and 125 about four or five years ago.

“This depreciation of the yen is a reflection of the dollar’s appreciation against the yen and the market expects that the yen’s depreciation is likely to continue and some people expect the dollar to rise towards 130” , says Sakakibara, currently president of the Institute for Indian. economic studies.

“If it goes to 130 — and beyond 130 — that could cause problems,” he told CNBC’s “Asia Squawk Box” on Tuesday. The Bank of Japan “will be alarmed” if the dollar-yen moves above 130, he added.

Bank of Japan governor Haruhiko Kuroda said on Tuesday that the Japanese currency’s recent moves have been “somewhat rapid” but reiterated that a weak yen is benefiting the Japanese economy as a whole, Reuters reported.

Under Kuroda’s leadership, the Bank of Japan has maintained an ultra-easy monetary policy for years in an effort to meet its always elusive inflation target.

“I don’t see the Bank of Japan really being upset about putting the inflation target first,” said Manpreet Gill, head of fixed income, currencies and commodities strategy at Standard Chartered Private Bank.

The current situation is actually helping the Bank of Japan achieve inflation, he said, although that may not last long, as the yen’s recent weakness was driven by the strength of the dollar, and several rate hikes by the Fed have already started. are included in the price.

Meanwhile, Galvin Chia of NatWest Markets said the Bank of Japan is currently in a “difficult situation.”

“The markets have really jumped on this idea, you know, as we’ve seen in the last two weeks, that the yen should devalue,” said Chia, an emerging markets strategist.

“My personal view is that the BOJ is rightly more concerned about the pace of [the yen’s] depreciation… and a kind of volatility that can arise around the financial markets as opposed to the level,” he said.