Japan is unlikely to interfere to stop the weak yen, according to a Asian tarde poll of analysts.
TOKYO Japan won’t intervene to stop the yen from falling, according to just half of economists polled. However, a fifth stated that a weakening dollar above 150 could lead to action.
The yen has fallen nearly 20% against the greenback due to a wider gap between Bank of Japan’s (BOJ), ultra-loose policy, and rapid tightening of global peers. This year’s yen fell to 144.99, a low of 24 years. Policymakers have indicated that they are ready to respond to volatile currency movements.
Market participants are anticipating more volatility and potential government action ahead of upcoming central bank meetings that include the BOJ, U.S. Federal Reserve, and Bank of England. On Wednesday, the yen traded around 143. [ECILT/US][ECILT/GB]
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However, only a small majority of economists believe that any direct action is unlikely. The Sept. 8-19 poll revealed that 12 of 23 respondents (or 52%) said the government wouldn’t buy yen to prevent the currency from weakening further.
A coordinated international action is also unlikely, as the United States favors a strong dollar in order to curb inflation. Akiyoshi Takumori (NYSE: SMFG), DS Asset Management.
“The ‘rate check’ surprised everyone, but intervention-signalling would be the last thing they could do,” Takumori said, referring to the BOJ last week asking currency traders for current rates – queries widely seen as a prelude to intervention.
Five respondents stated that 150 yen would prompt intervention.
Hiroshi Watanabe is a senior economist at Sony (NYSE SONY Financial Group) and said that intervention might be possible if the Japanese yen drops beyond the 150 line at very high speeds. However, in reality it’s highly unlikely due to the ineffectiveness in currency intervention.
Three others chose “155 yen for every dollar” as a trigger. Two chose 160, while one selected “weaker-than-165 yen/dollar”.
Japan’s last yen-buying intervention was in 1998 when the Asian financial crisis caused a rapid capital outflow and a sell-off.
FASTER INFLATION, WEAKER GROWTH
The survey revealed that economists downgraded Japan’s growth outlook due to rising inflation, coronavirus resurgence, and a slowdown in global economic activity.
According to the August poll, the economy is expected to grow by 1.4% annually in July-September. This is less than the 2.2% forecasted in August. The median estimate of 35 respondents was 1.4%. The October-December projection was 1.9%, as opposed to the 2.2% in the previous poll.
The world’s third largest economy experienced 3.5% growth in the second quarter of this year thanks to strong consumer and corporate spending.
According to the poll, core consumer price index (CPI), which excludes volatile food items, is likely to rise 2.8% over the next three months, exceeding the 2.5% previously predicted.
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The poll revealed that economists predicted core CPI would rise to 2.4% in the current fiscal year and slow to 1.2% by fiscal 2023.
Economists voted for Masayoshi Amamiya, BOJ Deputy Governor, as the top choice to be the next central bank chief to succeed Haruhiko Kuroda.
(For more stories from the Reuters global economy poll:
