Japan may intervene if yen dives toward 160 per dollar: ex-BOJ official

TOKYO: Japanese authorities may tolerate moderate yen declines but could intervene if the currency sharply depreciates towards 160 to the dollar, said Atsushi Takeuchi, a former central bank official who was involved in Tokyo’s market forays a decade ago.

The yen was set for its steepest weekly drop in a year on Friday after fiscal and monetary dove Sanae Takaichi’s surprise victory in a ruling party race led to receding expectations of a near-term interest rate hike by the Bank of Japan.

Takeuchi, who headed the BOJ’s foreign exchange division during currency interventions from 2010 to 2012, said the yen could stabilise from a narrowing interest rate gap.

The US Federal Reserve is expected to cut interest rates and the BOJ eventually raise rates as it rolls back years of stimulus, which will underpin the yen and prevent a one-sided dive towards 160 per dollar, Takeuchi said.

But the yen’s fall may accelerate if Takaichi, who is set to become Japan’s next premier, gives markets the impression the government would leave such moves unattended, Takeuchi said.

“Authorities won’t mind as long as the yen’s declines are moderate. Their alarm bells will start ringing if market players begin talking about the chance of sharp yen declines toward 160 or 170 per dollar,” Takeuchi told Reuters in an interview.

“If the yen falls that much, authorities could and must step in. While intervention can’t change the broad market trend, it can put a pause to sharp yen declines,” he said on Friday.