TOKYO (Reuters) – The ruling party’s Finance Committee Chairman Satsuki Katayama said Japan lacks effective means to combat sharp declines in the yen, as unilateral intervention in the currency market is likely to have limited effect in reversing its downward trend.
“Individual currency intervention will not be that effective” in stemming sharp declines in the yen driven by interest rate differentials between the United States and Japan, she told Reuters.
Raising ultra-low interest rates in Japan would also be difficult given the impact it could have on the 550 trillion yen ($3.84 trillion) of bank loans to the country, Katayama, head of the Liberal Democratic Party (LDP) Research Committee on Financial and Banking Systems, said on Wednesday.
A former official in the Ministry of Finance, Katayama has deep experience in financial markets.
Japanese authorities on Wednesday pointed to the opportunity to intervene to support the yen by conducting an exchange rate check with banks, although many analysts doubt Tokyo will actually intervene due to the difficulty of persuading its G7 peers.
(dollar = 143.3300 yen)