The latest headline generated by Hirohisa Fujii, Japan’s — err, rather mercurial — minister for currency fluctuations reinforces our earlier point that the screws are being tightened in Japan’s corridors of power.
Consider this headline on this Bloomberg story on Monday: Fujii may ‘take action’ on yen; G7 seeks stability
The recently appointed finance minister issued his “clearest warning yet that his nation is open to intervening in the currency market, even as the G7 declined to criticise the tumbling dollar”, according to the wire report.
This, from a finance minister who was warning just a few weeks ago that currency intervention can “destroy a free economy”.
But ministerial amnesia is a beautiful thing, and in Istanbul on Saturday after a G7 finance ministers’ meeting, Fujii said: “If currencies show some excessive moves in a biased direction, we will take action”. As Bloomberg reminds us:Fujii, 77, said last month he opposed stepping into the foreign-exchange market in principle, before revising that comment to say he wasn’t an advocate of a strong currency and that Japan was open to acting should the market move “abnormally.” Fujii said in Istanbul that his early comments about the yen “have been a bit misunderstood,” and that currencies should be set by markets.
The FT, citing observers “sympathetic to Fujii’s complaint”, also recently suggested that the yen-induced fireworks set off by the “loquacious” finance minister are “more the result of distortion and misunderstanding than any wavering in approach”.
Still, it added, Fujii’s earlier statements, that a stronger yen is not necessarily bad given the need to rebalance Japan’s export-dependent economy, “is hardly welcome among manufacturers already hurt by last year’s collapse in international demand”.
Indeed, to Akio Toyoda, Toyota’s new president, who warned last week that the automaker was “one step away from “capitulation to irrelevance or death”, that might be something of an understatement.
In the view of Stephen Jen, a seasoned currency strategist and now managing director at BlueGold Capital Management, Fujii is “confusing traders” and most likely still wants the yen to gain as the new DPJ-led government tries to refocus the economy toward domestic demand and away from exports. “I doubt [Fujii] will materially change his stance until Japan is pushed deep into recession,” he told Bloomberg.
Whatever he really thinks, Fujii might do well to listen to Richard Jerram, economist at Macquarie Research in Japan, who told the FT last week: “What we tend to expect from the finance minister is to say as little as possible with as much confidence as possible, in order to leave the markets guessing.
“What you’ve got to do is come up with inanities like: ‘We think markets should determine levels, however we may need to correct distortions’ — because if you say something like that, nobody has any idea what you really want.”
Related links:
Fujii: Yen intervention could ‘destroy a free economy’ – FT Alphaville
Will too-strong yen mean dollar-relief rally? – Seeking Alpha
What being like the yen means for QE currencies – FT Alphaville
The yen, greed & fear and the Britney factor - FT Alphaville