Furusawa Sees Japan Intervening in Yen Market Again

Japan's former top currency diplomat Mitsuhiro Furusawa thinks Tokyo may conduct joint yen intervention 'at any time' to stem the currency's falls. This could include coordinated action with the United States, which drove up the yen to around 155.20 per dollar from a 40-year low of 163.99 in July.

Furusawa said the current level of around 159.50 is 'clearly too weak' and hurts the economy by boosting import costs. He added that more fundamental steps are needed to reverse the yen's downtrend, such as faster rate hikes by the Bank of Japan (BOJ).

The BOJ has raised interest rates at a pace of roughly twice a year since exiting its massive stimulus in 2024, taking rates to a 31-year high of 1% in June. Furusawa thinks the central bank would like to raise rates to around 1.5% to 1.75%, as Japan's neutral rate sits in a range of 1.1% to 2.5%. He predicts the next move would likely come in December or January, followed by another hike sometime in the next fiscal year (beginning in April 2027).

Furusawa also emphasized that Prime Minister Sanae Takaichi's administration should not get in the way of the BOJ's rate hikes and meet its pledge on fiscal sustainability. He believes the ideal outcome would be to use monetary and fiscal policy to move away from a situation where the yen is excessively sold, while growth strategies begin to bear fruit and strengthen the Japanese economy.