Source: Zhitong Finance

Senior investor David Roche said that Japan is not seeking a stronger yen, but rather wants the yen to be relatively stable.

Recently, the trend of the yen has been like a roller coaster. Last week, the exchange rate of the yen against the US dollar broke 160. This is the biggest decline in more than 30 years. Since then, the exchange rate has rebounded when outsiders speculated that the Japanese authorities would intervene twice.

Independent Strategy president and global strategist Roche said in an interview on Thursday: “Japan's goal is not to make the yen particularly strong. I think their goal is a relatively stable yen — they don't want the yen to fall any further.”

He pointed out that the action taken by Japan was to “avoid causing inflation, which would weaken the prestige of the Bank of Japan Governor.”

After the Bank of Japan made its monetary policy decision in April, the weak yen continued despite warnings from the Japanese authorities.

According to reports, after the yen plummeted last week, the Japanese authorities may have used about 60 billion US dollars to support the yen. As of press release, the exchange rate of the yen against the US dollar is around 155.74.

The minutes of the latest policy meeting released by the Bank of Japan on Thursday showed that the central bank is concerned that a sharp weakening of the yen may push up import prices.

A member of the Bank of Japan's policy committee said at the last meeting that ended on April 26: “The recent depreciation of the yen and the rise in prices such as crude oil have begun to influence producer prices through rising import prices.”

“Although the depreciation of the yen may depress the economy in the short term through price increases driven by cost drivers, it may drive up potential inflation in the medium to long term,” members said.

Furthermore, as expectations of the Fed's interest rate cut were delayed, the US dollar continued to strengthen, and other currencies depreciated accordingly.

Roche said that Japan “cannot have a policy that actually strengthens the yen unless monetary policy is tightened,” adding that this will involve raising interest rates by at least 50 basis points and allowing “non-cancelling intervention” against the yen.

“In other words, it reduces the supply of domestic money. As far as I can see from the statistics, they (the Bank of Japan) didn't do that,” Roche said.