Tatsuo Yamasaki, a former top foreign exchange official in Japan, said the yen is undervalued by up to 20% against the dollar [1].
This assessment comes as Japan struggles to manage currency volatility, which affects trade balances and the cost of imports. A significant undervaluation suggests that market pricing does not reflect the currency's fundamental value, potentially prompting government intervention to stabilize the economy.
In an interview with Bloomberg in Tokyo on Monday, Yamasaki addressed the current state of the currency markets. "The yen should be as much as 20% stronger than it is," Yamasaki said [1]. He said the current exchange rate is detached from what he considers a fair market value.
Some estimates suggest a target rate of 130 yen per dollar [2]. Such a shift would represent a substantial increase in the yen's value compared to recent trading levels.
The comments follow recent statements from the Japanese government regarding market stability. Finance Minister Satsuki Katayama has renewed a pledge to stop excessive yen volatility, she said [2].
Japan has historically used a combination of verbal warnings and direct market interventions to prevent the yen from weakening too rapidly. The perspective provided by Yamasaki highlights a gap between current market trends and the goals of Japanese financial officials, a gap that often leads to volatility in global forex markets.
“"The yen should be as much as 20% stronger than it is,"”
If the Japanese government accepts the view that the yen is undervalued by 20%, it may increase the likelihood of aggressive currency interventions. A stronger yen would help lower the cost of imported energy and food for Japanese consumers but could potentially hurt the competitiveness of Japanese exporters on the global stage.
