"Mr. En" Sakakibara's Warning: "Yen May Surpass 170 Yen per Dollar"

Bank of Japan to Raise Interest Rates
"Kuroda Governor Retirement Timing Expected
No Effect from Forex Market Intervention"

Aceke Sakakibara, former Japanese Financial Secretary

[Asia Economy Reporter Lee Ji-eun] Former Japanese Vice Minister of Foreign Affairs for Foreign Exchange Policy, Sakakibara Eisuke, once known as "Mr. Yen," has warned that the yen-dollar exchange rate could surpass the 170 yen level.

On the 26th, Sakakibara stated in an interview with the US economic broadcaster CNBC, "The majority of businesspeople expect the yen's value to decline further," adding, "Surpassing 170 yen is entirely possible."

Sakakibara served as Vice Minister of Finance in Japan in the late 1990s during the Asian financial crisis and actively intervened in the foreign exchange market, earning the nicknames "Mr. Yen" and "Currency Czar."

Earlier, in May, Sakakibara predicted in an interview with Bloomberg TV that the yen's value would fall to the 140-150 yen range by the end of this year. In fact, the recent yen-dollar exchange rate has exceeded 150 yen, marking the lowest level in 32 years.

Sakakibara analyzed that Japan's maintenance of a loose monetary policy, unlike the United States, is the main factor behind the yen's depreciation. The widening interest rate gap between the US and Japan is strengthening the selling pressure on the yen.

He predicted that the Bank of Japan would eventually raise interest rates in response to ongoing inflationary pressures. However, he added that this would likely occur after April next year, when Haruhiko Kuroda's term as Governor of the Bank of Japan ends.

Sakakibara said, "If the economic situation next year leads to a judgment that the market is overheated, the Bank of Japan may raise interest rates," and "It is expected that the policy will shift to tightening by the end of next year."

He also stated, "Even if the authorities continue to intervene in the foreign exchange market, it will not be very effective," and "I believe the authorities are aware that intervention in the foreign exchange market is not a very effective method."

Meanwhile, after the yen-dollar exchange rate surpassed the 150 yen level, hitting a 32-year low, the Bank of Japan conducted two rounds of covert intervention on the 21st and 24th. Covert intervention is a Japanese term referring to unofficial government intervention in the foreign exchange market.

One and a half hours after the authorities intervened in the market on the 21st, the yen-dollar exchange rate fell to the 144 yen level but later closed trading in the high 147 yen range. As of 3:20 PM on the 26th in the Tokyo foreign exchange market, the dollar-yen rate is trading at 147.84 yen.

According to the Nihon Keizai Shimbun, the amount of funds the Bank of Japan injected to lower the yen-dollar exchange rate on the 21st is estimated to be 5.5 trillion yen (approximately 53 trillion won).