Japan’s FX intervention signals 160 yen line in the sand, says ex-official

By Makiko Yamazaki and Takaya Yamaguchi

TOKYO (Reuters) – Japanese authorities most likely intervened in the currency market to signify they see 160 yen to the dollar as their line in the sand, Columbia University scholastic and previous financing ministry executive Takatoshi Ito informed Reuters on Thursday.

“Intervention works if carried out in a prompt way,” stated Ito, who is a partner of previous Bank of Japan Governor Haruhiko Kuroda and maintains close contact with existing Japanese policymakers.

“By hammering speculative relocations with intervention, the authorities are attempting to create market expectations that 160 might be the dollar/yen’s ceiling,” he stated.

Japanese authorities are believed of having entered the forex market a minimum of two times today to avoid sharp and financially crippling decreases in the yen.

Ito stated the reserve bank might raise rates of interest two times to 0.5% by the end of this year if yen weak point continued and increased inflation considerably.

“When the yen’s decrease is continuing slowly showing interest-rate differentials, it’s tough to alter the pattern with currency intervention,” Ito stated.

“If the yen’s weak point continues and has a pass-through on inflation, 2 rate walkings by end-year might end up being an alternative for the BOJ,” he stated.

“There’s a possibility the BOJ might raise rates once again this fall at the earliest, and press the short-term policy rate to 0.5% by year-end,” stated Ito.

Ito functioned as deputy vice minister for worldwide affairs at Japan’s financing ministry from 1999-2001. He likewise functioned as a private-sector member of the federal government’s leading financial council for 2 years till 2008.

($1 = 156.0200 yen)