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Sakakibara Says Yen May Rise to 80, Endangering Japan Recovery

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By Shigeki Nozawa and Yoshiaki Nohara Dec. 22 (Bloomberg) -- Eisuke Sakakibara, formerly Japans top currency official, said the yen may climb to 80 per dollar in the first half of next year, hampering the economic recovery. A strong yen would cause stock losses and enhance deflation, which may cause Japans economy to slip into a double-dip recession, Sakakibara said at an event today in Tokyo hosted by Citigroup Global Markets Japan Inc. Japans government would find it difficult to intervene effectively to weaken the yen, said Sakakibara, who became known as Mr. Yen during his 1997-1999 tenure at the Ministry of Finance for his efforts to influence the yen rate through verbal and actual intervention in the currency markets. Japan hasnt sold its currency since March 16, 2004, when it was at about 109 per dollar. The Bank of Japan sold 14.8 trillion yen ($162 billion) in the first three months of 2004, after record sales of 20.4 trillion yen in 2003. Japan last bought the currency in 1998 as the rate fell as low as 147.66. The yen climbed to 84.83 per dollar on Nov. 27, the strongest since July 1995, stoking speculation the central bank may step in to stem the currencys gains. Sakakibara said in a Dec. 1 interview that intervention wouldnt be as effective as it was in 1995, when he headed the Finance Ministrys international financial bureau. U.S. policy makers such as Treasury Secretary Timothy Geithner may not be as willing to cooperate in joint currency operations, he said. The Bank of Japan has exhausted almost all options to keep the yen from rising, Sakakibara said today. Bank of Japan The central bank on Dec. 1 released a 10 trillion yen ($109 billion) credit program at the governments urging to do more to fight deflation. Under the program, the central bank will offer three-month loans to commercial banks at 0.1 percent interest. The bank also buys 1.8 trillion yen of bonds a month. The yen traded 91.19 per dollar as of 5:27 p.m. in Tokyo from 91.17 yesterday in New York. Large Japanese manufacturers expected the yen to average 91.16 per dollar in the six months to March 2010, according to the Bank of Japans quarterly Tankan survey released Dec. 14. To contact the reporters on this story: Shigeki Nozawa in Tokyo at Snozawa1@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net. Last Updated: December 22, 2009 03:48 EST

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12/22/2009