While Japan has breathing space before the yen's gains become a serious problem for the economy, policymakers are unlikely to stand by should it climb too fast or if key inflation measures slump, according to Takatoshi Ito, a former colleague of central bank chief Haruhiko Kuroda.
The yen trading at around 120 to 125 per dollar would be "a comfortable range" for Japan, Ito, a professor at Columbia University who was a deputy to Kuroda at the Finance Ministry in 1999 and 2000, said in an interview in Tokyo on Saturday. "Unless the yen goes to 115 from 117, and heads on to 110, it isn't that serious."
The yen has surged more than 3 percent versus the dollar in the past month to around 117 late Tuesday in Tokyo as turmoil in China's financial markets prompts investors to seek safe havens. The shift is chipping away at one of the key achievements of Abenomics: a weakening of the yen that has made exporters more competitive and supported efforts to spur inflation.