Yellen Fed May Pose Yen Threat to Japan, Abe Adviser Hamada Says

Janet Yellen’s nomination as Federal Reserve chairman raises the odds of prolonged U.S. stimulus that could strengthen the yen and damage the Japanese economy, said Koichi Hamada, an adviser to Prime Minister Shinzo Abe.

“Yellen probably won’t seek an exit from an accommodative policy immediately,” Hamada, a former Yale University professor, said in a phone interview from Connecticut. If the Fed lengthens stimulus, the yen may gain, hurting Japan’s recovery, Hamada said.

Hamada, 77, was one of Abe’s advisers on the creation of the reflationary policies called Abenomics and on choosing a governor for the Bank of Japan, the job taken by Haruhiko Kuroda in March this year. Today, Hamada said that Kuroda and his officials must be ready to act if a stronger yen damages the world’s third-biggest economy.

The yen tumbled about 20 percent against the dollar in the past year, helping Japanese exporters and Abe’s efforts to jolt the nation out of a 15-year deflationary malaise. The BOJ has already rolled out unprecedented stimulus.

“The BOJ doesn’t have to promise anything now, but I want them to be ready in case damage to Japan’s economy becomes clear,” Hamada said.

While Hamada has Abe’s ear, Hamada doesn’t speak for the Japanese government and Abe doesn’t always follow his advice. On Oct. 1, Abe announced that the government was pressing ahead with a sales-tax increase that Hamada opposed.

Hamada welcomed Yellen’s nomination, saying that her experience and expertise made her the best person for the job.

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