Former Japan FX tsar says yen weakening could trigger intervention at ‘any time’

TOKYO : Japanese authorities could intervene in the foreign exchange market to stem sharp falls in the yen “at any time” if its moves are excessive enough to warrant such action, a former top currency official in Japan told Reuters on Monday.

Takehiko Nakao, who was vice finance minister for international affairs in 2011-2013, made his comment as the Japanese currency hovered near a 34-year low touched last month against the dollar.

“The yen has weakened severely against the dollar,” Nakao said, citing the IMF’s gauge of real effective currency rates and the so-called Big Mac index designed to compare the purchasing power of currencies to buy hamburgers worldwide.

The weak yen weighs significantly on household real incomes and consumption, even though it boosts real-estate and stock prices, Nakao said.

“It’s undesirable,” Nakao said, referring to the yen’s fall of about 30 per cent against the dollar since 2022. The yen was last trading at around 151.70. It hit a 34-year low of 151.97 in March.

Japan last intervened in October 2022 when the yen weakened to the upper range of 151-152 yen.

Japanese officials have warned against “speculators” trying to sell off the yen, saying that they would not rule out any measures to respond flexibly to excessive currency moves.

When he was Japan’s currency tsar, Nakao led intervention operations by buying dollars to keep the yen from strengthening beyond a record high of just above 75 yen.

“It would be easier to get understanding from other countries when Japan intervenes to shore up the yen, rather than to weaken it to gain export competitiveness,” Nakao said.

“If you look at the yen’s level and its underlying move with signs of speculation, it wouldn’t surprise me if authorities intervened any time,” he said.