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Japan must intervene in the currency market or raise interest rates to defend the yen if it deteriorates beyond ¥ 130 to the dollar, the countrys previous leading currency diplomat Eisuke Sakakibara said Monday.Tokyo authorities do not need to take action yet, as the yens present weak point will not do excessive harm to an economy yet to fully emerge from deflation, Sakakibara said.But if the dollar increases above ¥ 130, “that could trigger problems,” stated Sakakibara, who is called “Mr. Yen” for master-minding numerous currency interventions in the 1990s. If that level is breached, Japan has the alternative of conducting dollar-selling, yen-buying intervention or treking the Bank of Japans ultralow rate of interest, he said.But Sakakibara, who is basically the sole currency diplomat in Japan who had experience with both yen-selling and yen-buying intervention, stated prospering in stemming yen falls might be an obstacle.” Its tough to sell the dollar to jail declines in the yen,” as there are limitations to the length of time Japan can do so by tapping its foreign reserves, he said.Japan has actually conducted yen-selling currency intervention numerous times, consisting of in substantial amounts, as it can finance the operation by printing yen.Dollar-selling intervention would need tapping Japans foreign reserves, which are plentiful but not without limits.The views of Sakakibara, who keeps close contact with incumbent policymakers, are carefully viewed by markets due to his experience with currency intervention and a knack for translating finance authorities stance on yen relocations.
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