Japan extended the term of its top currency official Masato Kanda for another year, in an unusual move that keeps the man behind last year’s $65 billion intervention strategy in place during a renewed bout of yen weakness.
(Bloomberg) — Japan extended the term of its top currency official Masato Kanda for another year, in an unusual move that keeps the man behind last year’s $65 billion intervention strategy in place during a renewed bout of yen weakness.
Kanda became just the fourth official in the past three decades to serve a third year as vice finance minister of international affairs, finance ministry documents indicated Tuesday.
“We put appropriate people in the right positions,” Finance Minister Shunichi Suzuki told reporters Tuesday following the announcement of Kanda’s reappointment. “Japan will also preside over the Group of Seven meetings until the end of the year. We need to maintain close collaboration in the field of international finance with G-7 and other nations.”
By sticking with Kanda, Japan is reaffirming its commitment to entering markets if needed, leaving no room for doubt over whether a newly appointed official will take the same firm stand against speculators.
Kanda warned again on Monday that he won’t rule out any options if he needs to take appropriate action over foreign exchange movements. For now, though, analysts see Japan staying out of markets unless the yen approaches 150, still some distance from the 143 range seen so far this week.
Kanda’s reappointment is “likely to lead to speculation that action will be taken if the yen’s depreciation speeds up,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.
The 58-year old is known as “outer space man” among ministry officials partly for his wide ranging interest in topics from currencies and economics to the future of human kind and the universe. His seemingly unlimited endurance is another reason they cite.
At the G-7 meetings in Niigata he gave “an impassioned toast about the importance of our work,” said Jay Shambaugh, under secretary for international affairs at the US Treasury. “He’s a very frank person, very principled. You always know where he stands and what Japan’s position is on something, so that makes him easy to work with.”
While he appears to have kept his US counterparts briefed, he’s often kept market participants guessing.
Kanda wrong-footed foreign exchange traders in September by stepping into markets to stop the yen sliding for the first time in 24 years. The nation was expected to hold off on such a move for longer to avoid angering the US.
He moved again at around midnight on Oct. 21 soon after the yen hit 151.95, as Japan conducted its biggest yen buying intervention on record. That approach differed from Japan’s playbook of stepping into markets during regular Japan trading hours.
In another move to keep speculators on the back foot, Kanda declined to immediately confirm the second round of yen buying. Japan reveals the total amount of intervention at the end of each month, but full disclosure of the daily activity in October didn’t take place until quarterly data was released in February.
The FX chief has also showed he wasn’t afraid to sell US Treasuries to fund intervention, another potential source of friction with the US. Some analysts and speculators had assumed that Japan’s intervention firepower to prop up the yen was much more limited than the size of the government’s dollar holdings, because of the Treasury holdings. Currently Japan has around $1.13 trillion in foreign currency reserves, mostly held in securities.
“Kanda has done a good job. It’s undeniable that the yen peaked out after the intervention,” said Daisuke Karakama, chief market economist at Mizuho Bank. “You could attribute it to other factors like the US CPI for the turnaround but the luck of timing is also a very important element in the market.”
Kanda joined the finance ministry in 1987 after graduating from the University of Tokyo. He later earned a master’s degree in economics from Oxford University. In 2002 he joined the ministry’s currency division and gained first-hand experience of intervention there.
Colleagues and global peers talk of Kanda’s big picture perspective as being close to that of a philosopher or a monk.
“The universe is too grand, our land, the Earth too small,” Kanda wrote in 2010 for Koushikai, an association of bureaucrats and corporate executives. “The origin of the universe and essence of our lives is unknowable. The knowledge of mankind is equivalent to nothing.”
–With assistance from Christopher Condon.
(Updates with comments from US Treasury official)
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