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Japan lacks G-7 support for forex intervention, ex-finance official says

TOKYO -- Fellow Group of Seven nations would be unlikely to accept moves by Japan to stop the yen's appreciation under the current economic conditions, says a former Japanese Finance Ministry official in charge of currency policy.

Naoyuki Shinohara, former vice minister of finance for international affairs, spoke with The Nikkei about the Japanese currency's rise to around 106 yen to the dollar.

"While the yen was excessively strong when it traded in the range of 70 to the dollar in the past, it was excessively weak in the 120 range," he said. "Based on effective exchange rates, the yen cannot be said to be either strong or weak right now."

Asked about the possibility of Japan resorting to a yen-selling intervention, Shinohara recalled when the yen spiked following the Lehman crisis in autumn 2008.

G-7 finance ministers and central bankers released a joint statement at that time expressing concern over "excessive volatility" in the yen. Japan did not intervene then, but likely would have won acceptance from the G-7 had it done so, said Shinohara, who was vice minister at the time.

But "under current economic conditions, I think it's very unlikely that the G-7 would share an understanding on the yen as it had back then," he said. "While there are concerns that the global economy may be weakening, the threat is not as serious as the Lehman crisis."

The U.S. Treasury Department said last week it has placed Japan and four other countries on a "monitoring list" that indicates the department will watch for unfair currency practices.

"This is an extension of the message that the U.S. has long been sending that nations with large current-account surpluses should strive for growth driven by domestic demand," Shinohara said.

While the move may not be without a hint of caution for Tokyo not to intervene, Japan would face difficulty in doing so anyway, he added.

"I think that the U.S. genuinely wants Japan to press ahead with fiscal policies and structural reforms to prevent a global economic slump," he said.


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