Japan would have to intervene if yen firms to 90-95 per dollar, PM’s adviser says

TOKYO Japan would intervene in foreign exchange markets if the yen firmed to between 90-95 per dollar, even if it upset the United States, a key economic adviser to Prime Minister Shinzo Abe said on Tuesday, asserting the right to curb currency volatility.

Koichi Hamada, special adviser to the Cabinet told Reuters in an interview that he had recently heard “many concerns” from economists and officials in the United States about the possibility of Japan intervening in currency markets – something it last did five years ago when it acted to weaken the yen.

“In case the yen happens to be so firm that it becomes between 90-95 yen per dollar, then Japan would have to intervene even if it angers the United States,” Hamada said. “I don’t think Japan would be able to wait.”

The Japanese currency firmed to an 18-month high at 105.55 yen JPY=EBS against the dollar last week after the Bank of Japan decided kept monetary policy unchanged. The dollar was around 109.20 yen on Tuesday. [FRX/]

Hamada said the central bank does not need to undertake further monetary easing for a while and can wait to gauge the effects from the negative interest rate it adopted in February.

Japanese authorities last intervened in the currency market in 2011, when they sold yen for dollars.

At the time, Tokyo got G7 consent to stem a yen spike driven by speculation that a devastating earthquake would force Japanese insurers to repatriate overseas funds to pay for damage claims.

“If verbal intervention alone works, that is the best. But if it is repeated many times, it will become ineffective,” Hamada told Reuters in an interview.

“Japan can warn markets that the nation has a right to stem volatile currency moves.”

Asked if Japan should raise a sales tax to 10 percent from 8 percent as planned next April, he said- “There are many risks to raising the sales tax when conditions are so rocky in the economy.”

(Reporting by Kaori Kaneko, Sumito Ito and Chang-Ran Kim- Editing by William Mallard and Simon Cameron-Moore)