• Bloomberg


The Bank of Japan should be prepared to counter gains in the yen if U.S. Federal Reserve Chairman Ben Bernanke signals more policy easing during the central bankers’ forum in Jackson Hole, Wyoming, a former BOJ official said.

“The absence of action on its own would encourage investors to buy up the yen,” Naohiko Baba, chief Japan economist at Goldman Sachs Japan Co. and a former lead financial system analyst at the central bank, said Thursday in Tokyo.

“The Bank of Japan learned that lesson last year” when it waited until October to add monetary stimulus after Bernanke suggested the U.S. may need a second round of quantitative easing, he said.

The yen has gained more than 6 percent against the dollar in the past three months, threatening to hobble Japan’s recovery from the March 11 catastrophe. Finance Minister Yoshihiko Noda on Wednesday unveiled a $100 billion program to help companies cope with the strengthening yen after yen-sales and an expansion of the BOJ’s asset-buying fund to ¥15 trillion ($195 billion) failed to alleviate the currency’s surge.

Bernanke is scheduled to speak Friday at the annual conference, the venue he used last year to hint at the second round of quantitative easing in which the Fed purchased $600 billion in Treasuries. The yen gained against the dollar after that, and the BOJ on Oct. 5 cut its benchmark interest rate to a range of zero to 0.1 percent and established a fund to buy government bonds and other financial assets.

“The Bank of Japan and the government must cooperate closely using a wide range of policies, including intervention and other policies like further easing,” Baba said. “The important thing is to show the determination of the government and the Bank of Japan to combat the yen’s strengthening trend.”

The yen was trading at 76.99 per dollar at 5 p.m. in Tokyo on Thursday. The currency reached a postwar record of 75.95 on Aug. 19 in New York.

The Fed pledged this month to keep its benchmark interest rate at a record-low zero to 0.25 percent at least through mid-2013 to revive a recovery that’s “considerably slower” than anticipated.

Bernanke told Congress on July 13 the Fed has stimulus options including buying additional securities, increasing the average maturity of its bond portfolio, lowering the interest rate on excess reserves and pledging to keep its balance sheet near a record high for a longer period of time.

Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo, said Tuesday he expects the BOJ to expand its asset fund by ¥3 trillion to ¥5 trillion in coordination with government-ordered yen sales as early as this month, compared with an earlier expectation of additional monetary stimulus in the fourth quarter.

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