Sakakibara Says Slower U.S. Recovery May Hurt Dollar (Update1)
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By Shigeki Nozawa
Jan. 18 (Bloomberg) -- Eisuke Sakakibara, formerly Japan’s top currency official, said the global economic recovery may slow in the second quarter, pushing Japan into a double-dip recession and weakening the dollar to 85 yen.
“Should the U.S. experience a relatively weak rebound from spring to summer there’s a high possibility the dollar will drop,” said Sakakibara in a Jan. 15 interview in Tokyo.
Japanese Finance Minister Naoto Kan and U.S. Treasury Secretary Timothy F. Geithner probably have an unwritten agreement to let the market set the dollar’s level, said Sakakibara, who became known as “Mr. Yen” during his 1997-1999 tenure at the Ministry of Finance for his efforts to influence the currency’s level through verbal and actual intervention in the markets. Kan and Geithner might change their approach should the dollar approach 80 yen, he said.
The yen has strengthened almost 3 percent since reaching its weakest level in four months on Jan. 8, the day after Kan said he would like the yen to weaken “a bit more,” indicating he’s more willing than his predecessor Hirohisa Fujii to sympathize with exporters’ concerns over a soaring currency. The yen rose to 84.83 per dollar on Nov. 27, the strongest since July 1995.
The yen traded at 90.76 per dollar as of 11:35 a.m. in Tokyo from 90.77 in New York on Jan. 15, when it advanced to 90.60, the strongest level since Dec. 21.
No Recent Intervention
Japan hasn’t sold its currency since March 16, 2004, when it was at about 109 per dollar. The Bank of Japan sold 14.8 trillion yen ($163 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.
Prime Minister Yukio Hatoyama’s government should compile a new supplementary budget because this fiscal year’s 7.2 trillion yen stimulus plan, which will be discussed in an ordinary Diet session today, won’t be enough to fuel economic growth, Sakakibara said.
“Even if the government issues 60 trillion to 70 trillion yen in new bonds, the market’s ability to absorb it is more than sufficient,” Sakakibara said. “The supplementary budget needs to be put together as soon as possible without excessive fear over increasing debt issuance.”
Japan’s government will sell 44.3 trillion yen of new debt next fiscal year to help fund a revenue shortfall as the national debt expands to an unprecedented 862 trillion yen, 181 percent of the nation’s gross domestic product.
“In order to boost tax revenue, we have to prioritize the recovery,” Sakakibara said. “Short-term fiscal stimulus is not a minus for the nation’s fiscal situation.”
The yield on the 1.3 percent bond due December 2019 fell one basis point to 1.31 percent in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price rose 0.088 yen to 99.912 yen.
To contact the reporters on this story: Shigeki Nozawa in Tokyo at Snozawa1@bloomberg.net
Last Updated: January 17, 2010 21:38 EST
