New BOJ Member Masai Warns About Risks of Excessive FX Moves

  • She says FX volatility raises strains in financial markets
  • Masai says Brexit vote added uncertainty to global economy

The Bank of Japan’s new board member warned that excessive moves in foreign-exchange markets pose risks for economic activity.

“It’s undesirable for foreign-exchange rates to move by not reflecting economic fundamentals,” Takako Masai, the board member who officially joined the bank Thursday, said at her inaugural press conference in Tokyo. “Excessive moves will raise risks of pausing various activities for investment.”

Masai will cast her first vote on July 29, in a policy meeting at which Societe Generale SA and JPMorgan Chase & Co. expect the central bank to expand stimulus as its 2 percent inflation target remains distant. The yen’s strength after the Brexit vote adds risks for Japanese company profits and poses challenges for domestic investment and wage gains.

“We expect further easing in July,” Takuji Aida, chief Japan economist at Societe Generale, wrote in a report Wednesday. “Chances are growing for the yen to go beyond 100 with the Brexit,” which would cause the BOJ to cut the price view in its outlook report to be released at July’s meeting, he said.

The yen has gained about 8 percent against the dollar in June and its surge to as much as 99.02 per dollar on June 24 as the U.K. voted to leave the EU caused officials to stabilize the rate verbally.

In the press conference, Masai refrained from giving her view on the BOJ’s current strategy of monetary stimulus including negative rates, saying she will discuss it with her colleagues at the central bank.

Brexit Worries

She expressed worries about the Brexit vote, saying ”uncertainties in the global economy grew even more given the result of the U.K. referendum on leaving the European Union.” Masai said the BOJ must monitor the impact of such uncertainty “on Japan’s growth, prices and sentiment of households and companies.”

Masai is replacing Koji Ishida, who dissented from votes to expand monetary stimulus in October 2014 and for introduction of a negative rate in January. Takahide Kiuchi and Takehiro Sato are the only two members of the current nine on the board chosen by an administration before Prime Minister Shinzo took office in 2012, making it less likely that Kuroda will lose votes on his policies.

The new board member has worked at the Toronto Dominion Bank and Calyon Corporate and Investment Bank. Masai, a foreign-exchange specialist at Shinsei Bank Ltd., is the only woman on the board after Sayuri Shirai left at the end of her term on March 31.

Governor Haruhiko Kuroda is facing challenges in meeting his 2 percent inflation target as consumer prices are falling back to almost where they were when he began his unprecedented asset-purchase program in April 2013.

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