ADB’s Kuroda Says Fundamentals Don’t Justify ‘Huge’ Yen Gains

The yen’s surge against other currencies since the global financial crisis in 2008 isn’t warranted considering the state of the Japanese economy, Asian Development Bank President Haruhiko Kuroda said.

“The economic fundamentals of Japan do not justify the strongest currency in the world” being the yen, Kuroda said at a press conference in Tokyo today. “I do think economic fundamentals do not justify such a huge appreciation of the yen in the last two to three years.”

Japan’s currency has gained more than 25 percent against the dollar since the collapse of Lehman Brothers Holdings Inc. on Sept. 15, 2008, hampering the country’s export growth. The Finance Ministry intervened in the currency market for the first time in six years on Sept. 15 to try to halt the yen’s advance.

That sale of more than 2 trillion yen initially caused the Japanese currency to weaken to around 85.75 to the dollar from about 83, before reversing course in the following weeks to reach a 15-year high of 80.22 on Nov. 1. It has weakened again in recent weeks, and traded at 83.48 at 4:25 p.m. in Tokyo today.

Kuroda, 66, who was formerly Japan’s top finance ministry official in charge of currency policy, said the strong yen won’t affect exports right away because of a time lag. What it will hit are company profits and spending plans by reducing overseas earnings in yen terms, he said.

“Yen appreciation instantly affects the profit situation of the corporate sector,” Kuroda said. “That would affect significantly plant and equipment investment by the corporate sector.”

Kuroda directed Japan’s currency policy as the vice finance minister of international affairs from July 1999 to January 2003. Japan sold more than 14 trillion yen conducting intervention during his tenure.

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