Former Critic of `Foolish' Intervention Becomes Japan Vice Finance Chief
A politician who once cited traders as saying Japan’s currency-market intervention efforts were “foolish” and who has criticized the Finance Ministry’s policies was named vice finance minister.
Japan’s cabinet today approved the appointment of Fumihiko Igarashi as one of two vice finance chiefs, Finance Minister Yoshihiko Noda told reporters in Tokyo. Igarashi, 61, who started out as a political reporter at Jiji Press and is a Lower House member of parliament, published a book in 2006 saying the Finance Ministry was the “virtual ruler” of Japan.
Igarashi’s selection comes less than a week after Japan sold yen in the currency market for the first time in six years. While the finance minister is in charge of ordering intervention, his new deputy may express opposition to Japan’s yen-selling effort if it doesn’t look to be working, said economist Masamichi Adachi.
“He’d probably be one of the officials who would oppose intervention if it gets to the point where yen sales aren’t looking effective,” says Adachi, a senior economist at JPMorgan Chase & Co. “The yen weakened but it’s still hard to imagine that the Japanese government can prevent a strong yen once investors start buying it in reaction to any further Fed easing or concern about the U.S. economy.”
The currency was trading at 85.43 per dollar around 5:03 p.m. in Tokyo. It reached a 15-year high earlier this month amid speculation the Federal Reserve will boost monetary stimulus to aid the slowing U.S. economy. The surge prompted Japan to enter the currency market on Sep. 15.
In 2004, when his Democratic Party of Japan was in the opposition, Igarashi told parliament that traders were talking about the Japanese government’s “foolish intervention,” because it appeared that authorities were merely trying to use up the money allotted for such action instead of stopping the yen’s appreciation.
“Have you reflected on this,” Igarashi asked then- Finance Minister Sadakazu Tanigaki, who responded by calling on Igarashi to take back the “foolish intervention” comment.
Asked about his past remarks on intervention and what he thought of Japan’s currency-market action last week, Igarashi said today that intervention “is a topic reserved for the finance minister.” The Finance Ministry makes decisions on intervention and the Bank of Japan carries them out.
Japan’s cabinet chose as the other vice finance minister Mitsuru Sakurai, 54, a doctor and a third-term Upper House lawmaker.
Noda said today that Igarashi will oversee tax matters and international affairs, and Sakurai will be in charge of the budget and the ministry’s relations with the Bank of Japan.
Japan spent about 35 trillion yen between January 2003 and March 2004 to stop the yen’s advance, and then stayed out of the currency market for six years until last week. In March 2004, the yen was around 109 per dollar.
The Bank of Japan last week said deposits held by financial companies at the central bank climbed by 2 trillion yen ($23 billion), in an indication of the size of the Sept. 15 intervention.
Igarashi has published two books critical of the Finance Ministry, including, in 2006, “Zaimusho’s Return to Power; A Virtual Ruler of Japan,” referring to the Japanese name for the department.
He has said that tax increases and cuts in social welfare spending that the Finance Ministry espouse benefit the ministry and not the Japanese people.
Igarashi said on Aug. 25 in Tokyo that he’s more concerned about an economic slump next year than the current state of economy, and called for a new stimulus package to prevent a slowdown.
As export growth decelerated to 23.5 percent in July, its slowest pace this year, the overall economy grew at a 1.5 percent annual rate in the second quarter, less than half the pace of the previous period.