Yen Intervention 'Could Take Place Again' as Currency Continues to Weaken

The yen is seen as too weak by former Japan FX diplomat Furusawa, who believes that Tokyo and Washington could intervene again to counter excessive volatility in the currency market. According to Furusawa, intervention 'could take place again at any time, including coordinated action with the United States.'

Last month, Japan's Ministry of Finance purchased yen in coordination with the U.S. Treasury to stabilize the exchange rate, which had fallen past 163 to the dollar in July, its weakest level in nearly four decades. The current exchange rate is around 159.35 yen per dollar.

Furusawa estimates that faster BOJ rate hikes are needed to reverse the yen's downtrend and believes that the central bank would ultimately like to raise rates to 1.5% to 1.75%. He also thinks it's equally important for the BOJ to signal a faster pace of future hikes.

The current debt-to-GDP ratio in Japan stands at 248.7%, the highest in the world, and Furusawa warns that Prime Minister Sanae Takaichi's government shouldn't stand in the way of BOJ rate hikes, as intervention alone only buys time.