Weak Yen Puts Japan at Risk, Says Ex-BOJ Deputy Iwata

Japan is in danger of falling into a recession as the yen’s decline reduces the purchasing power of households and squeezes corporate profits, said a former deputy governor of the Bank of Japan.

“The current yen weakness is slightly excessive,” Kazumasa Iwata, the deputy from 2003-2008, said in an interview on Sept. 19 in Tokyo. “Abenomics entails the risk of ‘beggar thyself’ consequences and signs are already emerging.”

The yen is trading near a six-year low against the dollar as diverging monetary policies from the U.S. to Japan threaten to increase exchange-rate volatility. Rising import costs are straining the economy as Prime Minister Shinzo Abe weighs whether Japan can take another sales tax increase to rein in the world’s biggest debt burden.

“Currency levels appropriate for reflecting Japan’s economic fundamentals are 90-100 yen to the dollar,” said Iwata, the president of the Japan Center of Economic Research.

The yen traded at 108.80 per dollar as of 1:51 p.m. in Tokyo after touching 109.46 on Sept. 19, the weakest since August 2008, according Bloomberg data. It’s depreciated by 4.5 percent over the past month, the most among the 16 major currencies tracked by Bloomberg.

Haruhiko Kuroda, the BOJ governor handpicked by Abe in 2012, has said he’ll do what’s needed to achieve the inflation target as he continues unprecedented easing.

Speaking at a Group of 20 meeting in Cairns, Australia, on Sept. 19 after the dollar rose above 109 yen, Kuroda said he didn’t see any big problems with current movements in exchange rates.

http://www.bloomberg.com/news/2014-0...-by-iwata.html