WSJ: Japan May Intervene on Yen Without U.S. Support
By GEORGE NISHIYAMA, TAKASHI MOCHIZUKI and ALEXANDER MARTIN
TOKYO—Japan's economy minister said Thursday that Tokyo may intervene in the currency market on its own to rein in the yen's strength, even without the consent of the U.S.
The minister, Seiji Maehara, also said foreign exchange was an issue over which Japan and the U.S. were at odds, and that their differences couldn't be resolved through negotiations.
"If we judge that the yen has become excessively strong, even if we have held prior talks, it's true that Japan may intervene on its own," Mr. Maehara said in an exclusive interview, when asked about U.S.-Japan relations over currency policy.
"The currency issue reflects national interests," Mr. Maehara said, adding: "It's not something to negotiate about."
While handling currency issues isn't Mr. Maehara's prerogative, his comments are another indication of Japan's concerns about the yen's persistent strength, which is hurting the country's already slowing exports.
At mid morning in New York, the dollar was at ¥78.52, compared with ¥78.19 on Wednesday evening. Mr. Maehara said recently that the yen was "on a strong note."
Separately Thursday, another Cabinet member, Finance Minister Koriki Jojima, said he conveyed his worries over the yen's strength to his counterparts in the Group of Seven advanced industrialized economies. The G-7 finance ministers met on the sidelines of the annual meeting of the International Monetary Fund.
Mr. Maehara, known as an advocate of aggressive monetary easing, will hold a rare meeting with Federal Reserve Chairman Ben Bernanke and European Central Bank President Mario Draghi on Friday. He said, though, that he won't raise the currency issue with the Fed chairman.
Instead, he shifted focus to the Bank of Japan, suggesting the bank's monetary easing so far hasn't been enough to beat long-running deflation.
"The BOJ itself set up a 1% inflation goal in February, and currently prices are still falling moderately, meaning the goal hasn't been achieved yet. It's important that the central bank do what it can to fulfill its promise," Mr. Maehara said. "It all comes down to my stance that it's important for the BOJ to deliver results. My stance is unchanged to keep demanding the BOJ undertake powerful monetary easing."
Mr. Maehara repeated that foreign bond purchases are a policy option for the Bank of Japan, something the finance ministry opposes because such purchases would be seen as a form of currency intervention. The finance ministry is in charge of ordering Japan's foreign-exchange interventions, although the central bank actually interacts with the market.
But Mr. Maehara stressed that buying foreign bonds would be purely a way to expand the monetary base, giving a boost to Japanese economic growth. It would be up to the central bank to find a way to conduct the purchases that wouldn't be seen as currency intervention, he said.
In 2001, Nobuyuki Nakahara, a member of the central bank's policy board at the time, proposed that the central bank could buy a fixed monthly amount of foreign bonds as a supplemental way to broaden base money, not as a way to intervene in the currency market. The proposal wasn't adopted.
Mr. Maehara, who was previously the policy chief for the ruling Democratic Party of Japan, also said the government may decide to make the central bank more accountable by forging a "policy accord" with it should the central bank fail to deliver results in its fight against deflation. That would be a divergence from the current policy of guaranteeing the bank's independence.
"If close coordination between the government and the Bank of Japan can be guaranteed, we don't need a policy agreement. But if that's not possible, or the BOJ can't achieve the inflation goal, it's important for the government and the BOJ to have agreements documented," Mr. Maehara said.
Mr. Maehara earlier this month attended the bank's policy-setting meeting, the first time a minister has attended in nine years. Mr. Maehara said he will use various other channels to communicate with the BOJ.
"When we decide things in the political world, it's not necessarily done only though formal meetings. There can be informal contacts, and we will discuss things in many forms, and that's what we call close coordination with the BOJ," Mr. Maehara said.
