JBIC's Watanabe sees yen at current levels, Kuroda's weak yen view not strange

[TOKYO] The yen is likely to move around current levels towards year-end even if the United States raises interest rates, said a former top currency diplomat who now heads the state-operated lender Japan Bank for International Cooperation.

Hiroshi Watanabe said he saw nothing strange in a recent remark by Bank of Japan Governor Haruhiko Kuroda that the yen is unlikely to weaken further.

Watanabe, who served as vice finance minister for international affairs for three years to 2007, has influence in Japanese economic policy via a broad network of policymakers in and outside Japan. "The current exchange rates have factored in the next US interest rate hike so the yen is unlikely to weaken further. I had said this before Kuroda made the remark," Mr Watanabe told reporters. "I saw nothing strange in what Kuroda said" although it was misleading for the BOJ governor to refer to real effective exchange rate, Mr Watanabe added. "There's no conspiracy between us." Mr Watanabe and Mr Kuroda have both served as Japan's top currency diplomat at the finance ministry.

Mr Kuroda told parliament this month that the yen was unlikely to fall further on a real effective exchange rate basis as it was already "very weak" - a remark that has effectively put a floor under the currency.

The yen had earlier slid to a 13-year low of 125.86 and many foreign exchange traders were expecting a slide to 130, before Kuroda's remark prompted the yen to jump by 2 yen to the dollar.

Mr Kuroda later qualified his comment, saying he had not been making any assessment on nominal yen levels or predicting its future moves.

The yen is now trading at around 123.5 to the dollar.

REUTERS