As ache from weak yen deepens, Japan’s ex-currency chief Kanda warns of motion

By Tetsushi Kajimoto and Makiko Yamazaki

TOKYO (Reuters) – Japan will act appropriately towards extra actions on the international alternate market, former forex chief Masato Kanda advised Reuters, issuing a warning because the nation continues to really feel ache from a weaker yen.

Kanda, now a particular adviser to Prime Minister Shigeru Ishiba and the finance ministry, stated in an interview that forex market volatility had elevated reflecting latest modifications in financial insurance policies and political conditions in main nations.

“There isn’t a change to our stance that we might want to reply appropriately to extra actions on the forex market as extreme international alternate volatility is undesirable,” he stated.

Kanda’s warning got here because the Japanese forex weakened to a three-month low of close to 155 to the greenback, edging nearer to the 160 threshold that merchants see because the authorities’ line within the sand.

Throughout his three-year tenure as vice finance minister for worldwide affairs, Kanda carried out the primary yen-buying intervention for twenty-four years in 2022 and led the most important yen-buying intervention on report this yr.

He stepped down on the finish of July this yr and is poised to change into the subsequent head of the Asian Improvement Financial institution.

Japan’s commerce not generates a surplus attributable to a surge in the price of vitality imports and a rise in offshore manufacturing, lowering the weak yen’s constructive affect on exports.

“We’re observing a state of affairs once more the place a weaker yen pushes up import prices and inflict ache on odd folks’s lives,” stated Kanda.

In the meantime, he stated, the falling yen not prompts export-oriented corporations to spice up exports as they do not search to extend market share with worth reductions and as an alternative shift manufacturing overseas.

“All in all, there are extra individuals who say the weak yen is extra painful,” he stated.

Kanda stated that, whereas short-term actions are vastly pushed by hypothesis, the one answer to stem the yen’s weak spot in long run is to strengthen the economic system by means of structural reforms.

“The weak yen primarily means an outflow of wealth such because it will increase expenditure for vitality imports,” he stated.