Ex-BOJ Mizuno: FX intervention may gain understanding

By Leika Kihara

TOKYO (BestGrowthStock) – Japanese currency intervention may gain some understanding in the global community if it is aimed at curbing yen gains driven by factors Tokyo cannot control, a former Bank of Japan board member said.

Japan needs to get serious about stemming sharp yen gains, which hurt the economy by prompting companies to shift jobs and capital spending overseas, and act on its words when it warns of intervention, Atsushi Mizuno said on Tuesday.

“I know some people think Japanese intervention won’t be able to gain the understanding of its counterparts, and that solo intervention won’t work. Some also say intervention without the backing of monetary easing won’t work,” Mizuno said.

“It’s true intervention aimed at directly pushing up (the dollar/yen rate) won’t gain understanding. But the yen’s current rise is driven by the outlook for the U.S. economy and passive intervention, or intervention to deal with something Japan cannot control, may gain a certain level of understanding,” he told Reuters in an interview.

Mizuno, who sat on the BOJ board until last December, is currently vice chairman of Credit Suisse’s fixed-income business in the Asia-Pacific region.

Japanese policymakers have tried to talk down the yen and signaled the chance of intervention after the yen hit a 15-year high against the dollar last week.

Mizuno, who was a prominent bond strategist before sitting on the BOJ board, said Tokyo needed to send a clear message to the market promptly if it cannot tolerate current yen rises.


“It’s important for the government to express concern over the yen’s rise,” he said.

“It’s also counterproductive to say it will intervene, but not act on its words. The government needs to be strategic when communicating with the market on foreign exchange. But it also needs to be bold when necessary.”

Tokyo would probably have to intervene alone if it were to step in to curb yen gains, as its Group of Seven counterparts, happy with the benefits to exports from their weak currencies, are in no mood for coordinated intervention.

Japan has not intervened in the currency market since 2004, when it ended a massive yen-selling campaign to beat deflation and a domestic banking crisis.

With its fiscal options constrained by Japan’s huge public debt, the government has been leaning on the BOJ to do more to ease the pain from sharp yen rises on the economy.

The central bank responded by expanding a fund supply tool at an emergency meeting on Monday. But the move did little to weaken the yen, as markets saw it as having a limited effect on the economy and as more a token gesture to appease the government and show that the bank was doing its part to beat deflation.

Mizuno said the remaining options for the BOJ were limited, and that the key was for the central bank to communicate more clearly with markets what exactly it wants to achieve in loosening policy.

He ruled out the possibility of the BOJ increasing its outright government bond purchases from the current 21.6 trillion yen ($255.5 billion) per year in the future.

“It’s not an option for the BOJ and it will not be welcomed by Japanese investors,” who have strong appetite for bonds, he said.

($1=84.53 Yen)

(Additional reporting by Mari Terawaki, Shigeo Kodama; Editing by Edmund Klamann)

Ex-BOJ Mizuno: FX intervention may gain understanding