The nightmare is about to repeat itself? “Mr. Yen”: U.S.-Japan monetary policy differences continue to widen the yen against the dollar or fall below 160
News from the Financial Association on July 7 (edited by Bian Chun)Eisuke Sakakibara, a former Japanese vice-finance minister dubbed “Mr. Yen,” said the yen could fall below more than 30-year lows hit last year amid widening monetary policy differences between Japan and the United States.
Sakakibara was dubbed “Mr. Yen” because of his influence on the yen during his tenure as Japan’s vice finance minister from 1997 to 1999. He is currently the director of the Institute for Indian Economic Studies.
Display Hideshi Sakakibara,The yen could depreciate by more than 10% from current levels as the BOJ sticks to its ultra-loose policy and the Fed raises rates further to curb inflation. Currently, the yen is trading at about 144 yen to the dollar.
On Wednesday local time, the Federal Reserve released the minutes of its June monetary policy meeting. The minutes showed that almost all Fed officials expected more rate hikes this year.
“JPY/USD could even fall below 160, maybe next year,” he said. He also noted that at around 160 yen to the dollar, authorities “could try to intervene to strengthen the yen.”
recently,Shorting the yen makes a comeback among investors, as a drop in U.S. Treasury bonds prompted investors to sell the yen and buy the higher-yielding dollar. The yen is the worst-performing G10 currency this year, plunging 9% against the dollar, prompting officials to resume verbal interventions to slow the yen’s decline and warn of tougher action.
Sakakibara, who correctly predicted the yen’s fall to 150 per dollar last year, said the yen could continue to weaken until the Bank of Japan tightens policy. Policy tightening could come in the form of the simultaneous abolition of negative interest rates and abandonment of controls on bond yields by the end of next year.
He also said policy tightening is likely in 2024 if “the Japanese economy overheats as expected”.
The Japanese authorities may take action again
In September last year, Japanese authorities stepped into the market to support the yen for the first time in nearly 25 years. The yen hit 145.90 per dollar earlier after a Bank of Japan meeting. In October last year, as the yen quickly approached 152 against the dollar, Japanese authorities stepped into the market again.
In total, Japanese authorities spent about $65 billion last year to prop up the yen.
Sakakibara display,Intervention without warning, if the authorities deem it necessary, may be the most effective strategy to boost the yen。
“If I were still in this position, I would surprise the market at this point,” he said. “I’ll be quiet for a while and intervene when the market doesn’t expect it. That will be more effective.”
2023-07-07 00:16:00
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