The yen strengthened for a third day against the dollar after Bank of Japan chief Haruhiko Kuroda said it’s hard to see his nation’s currency falling more.
The yen’s exchange rate adjusted for inflation and trade with other nations has returned to levels it was at before the collapse of Lehman Brothers Holdings in 2008, Kuroda said. Japan’s currency pared its advance as Economy Minister Akira Amari said Kuroda’s comments might be distorted from what he meant and didn’t intend to move the currency market.
“The yen is unlikely to weaken further in real effective terms if you think with common sense, given how far it has come,” Kuroda said in parliament Wednesday.
The comments underscore the view that policy makers in Japan aren’t seeking further depreciation in the yen, which has lost 11 percent since the BOJ boosted record monetary easing in October. With the currency punching through 125 to the dollar to a 13-year low this month, the economy and finance ministers have expressed concern about “abrupt” and “rough” moves in foreign exchange markets.
“These are very significant comments,” Greg Gibbs, a strategist at Royal Bank of Scotland Group Plc in Singapore, wrote in a note. “Kuroda has said nothing like this in the past, preferring to stand aside from comments on the exchange rate. He has often balanced the calls from others that the currency was weak, by suggesting it should reflect fundamentals that were by his making intended to weaken the yen.”
The yen surged 0.9 percent to 123.17 per dollar at 7:04 a.m. New York time, after earlier strengthening to 122.46. It appreciated 0.8 percent to 139.20 per euro.
The newest member of the BOJ board, Yutaka Harada, said in an interview last week that the excessive strength in the yen that damaged Japanese manufacturing in recent years had now been corrected.
While the yen’s 31 percent slump against the greenback since Prime Minister Shinzo Abe came to office in December 2012 has boosted profits among large exporters, it has also increased costs for importers and undercut the purchasing power of Japanese consumers.
Hiroshi Watanabe, a former currency chief at Japan’s finance ministry, said Tuesday that the yen was near the edge of a “tolerable range.” It was unlikely to weaken to 130 per dollar this year, even if the U.S. Federal Reserve raises interest rates, said Watanabe, who is now chief executive officer at the Japan Bank for International Cooperation.
Japan and the U.S. should refrain from intervening in the currency markets verbally or physically, said Watanabe, who was vice minister of finance for international affairs from 2004 to 2007.
Such actions distort the market and invite some negative effects and don’t have a lasting effect, he said. Japan didn’t intervene while he was in charge of foreign exchange policy.