Japan and the United States are likely to intervene again if the yen resumes its decline, as Washington’s backing has reduced constraints on Tokyo’s efforts to support the currency, a former Bank of Japan (BOJ) official said.
Atsushi Takeuchi, who was involved in Japan’s currency interventions more than a decade ago, said the recent joint yen-buying action had sent a strong signal to markets that a one-way fall in the currency would not continue.
“The fact the United States stood behind Japan and took action has a huge symbolic meaning,” Takeuchi told Reuters, adding that traders would be less likely to place bets on further yen weakness.
The yen has held above recent 40-year lows since the intervention, with Takeuchi saying the currency was likely to trade within a range of 155 to 162 per US dollar in the near term.
“If the yen shows signs of drifting lower, Japan and the United States will certainly intervene again,” he said.
Takeuchi said US involvement was significant because Washington risked losing credibility if it allowed the yen to weaken again after backing Japan’s efforts.
However, he said intervention alone would not provide a lasting boost to the yen unless Japan addressed market concerns over expansionary fiscal policies and the government’s stance towards further BOJ rate hikes.
He said a sharp rise in Japanese government bond yields likely influenced Washington’s decision to join efforts to stabilise the yen. The 10-year Japanese government bond yield reached a 30-year high last month after markets reacted to expectations of increased government spending and possible pressure on monetary policy.
Takeuchi said the United States was also concerned about potential spillovers from Japan’s bond market turmoil, as rising Japanese yields could add pressure to global markets.
Takeuchi, now president of the Ricoh Institute of Sustainability and Business, previously took part in several yen-selling interventions between 2010 and 2012.
