Japan’s ‘Mr. Yen’ Sees Rise Up to 76 Per Dollar

Japan’s yen may strengthen to as high as 75 per dollar, a former top Finance Ministry official said as policymakers voiced increased concern about the threat the strengthening currency poses to the nation’s economy.

The yen “is going to hold in the 70’s range and it could even go as far as 75 to 76 yen per dollar,” Eisuke Sakakibara, who directed exchange-rate policy at the Ministry of Finance between 1997 and 1999 and is currently a professor at Aoyama Gakuin University, said at a forum in Tokyo today. He didn’t specify a timeframe for the forecast.

A Bank of Japan board member earlier today signaled the central bank was prepared to “proactively” take policy action should the yen’s advance threaten growth as the currency advanced to a four-month high against the dollar. The gains risk eroding the profits of exporters, a key driver of growth, at a time when the economy is recovering from a record earthquake.

“We are at a critical point,” in determining the impact of the yen’s gain on the economy and whether the strengthening will become a trend or is temporary, BOJ board member Hidetoshi Kamezaki, said at a press conference today in Mie, central Japan.

Japan’s currency rose to 77.58 against the dollar today, the highest since March 17, on concern lawmakers would fail to reach an agreement on a plan to raise the U.S. debt ceiling needed to prevent default.

Sakakibara’s comments echoed his June 14 call for the yen to rise to 75 to 80 in the “not too distant future.” He became known as “Mr. Yen” during his tenure at the Finance Ministry because of his efforts to influence the yen rate through verbal and actual intervention in currency markets.

Weigh on Recovery

Finance Minister Yoshihiko Noda told reporters today he was monitoring markets closely, reiterated daily remarks he has made in the past week. BOJ Governor Masaaki Shirakawa also said this week that the yen could weigh on an economy recovering from a record earthquake.

The Japanese currency’s strengthening past 80 yen to the dollar is slowing the nation’s economic recovery, Toyota Motor Corp. President Akio Toyoda said on July 19. Nissan Motor Co.’s Chief Executive Officer Carlos Ghosn said on July 16 that “the high yen is definitely a headwind.”

“The yen’s gains could have a negative effect on the economy,” said Kamezaki, a former executive of Mitsubishi Corp., a general trading company. “We shouldn’t rule out any policy options,” he said, adding there was no need for the central bank to ease policy further now.

Currency Intervention

Kamezaki said currency intervention by the Finance Ministry could be effective in combating volatile moves in the foreign- exchange market. The government hasn’t sold yen since March, when it stepped in with its Group of Seven counterparts to curb gains in the yen. The central bank conducts intervention at the behest of the Finance Ministry.

Exports had only just shown signs of rebounding from the power and supply constraints resulting from the March earthquake. Overseas shipments fell 1.6 percent in June, the smallest drop since the temblor.

Kamezaki said the U.S. debt ceiling and European sovereign debt problems are affecting currencies. A credit-rating downgrade and a default in U.S. sovereign debt could be “a major problem” for Japan’s financial markets, he said.

Shirakawa said in a speech this week that a stronger currency could hurt corporate sentiment and warranted “careful monitoring.” The BOJ left the benchmark lending rate between zero and 0.1 percent at a meeting earlier this month. The board will next meet on Aug. 4-5.

To contact the reporter on this story: Keiko Ujikane in Mie at kujikane@bloomberg.net; Kyoko Shimodoi in Tokyo at kshimodoi@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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