Yen Is in Line With Fundamental Trends, Says Former FX Chief

(Bloomberg) -- No major changes in monetary policy are likely to come from the Bank of Japan’s meeting on Tuesday, so there shouldn’t be too much impact on the yen, former currency chief Tatsuo Yamasaki said in an interview.

Japan’s currency is in line with economic fundamentals, and there’s not much upward or downward pressure on it now, said Yamasaki, who is now a professor at the International University of Health and Welfare.

Yen volatility neared a seven-week high ahead of the central bank’s decision on Tuesday. Media reports have suggested a range of possible outcomes. They include allowing for a more natural rise in long-term interest rates and tinkering with language to show the BOJ is paying attention to its policy’s side effects. Economists surveyed by Bloomberg unanimously forecast that monetary policy will remain unchanged.

"It’s possible they’ll revise their price outlook downward," Yamasaki said on Monday. "However, it’s extremely hard for me to imagine they’ll change monetary policy."

"On the other hand, if you lower the price outlook, you have to make this intense monetary easing last longer," he added. "I think it’s natural that they’d want to do something to increase the sustainability of their monetary easing."

Yamasaki said the central bank may change the composition of its asset purchases in pursuit of sustainability, buying more exchange-traded funds linked to the broader Topix and fewer linked to the Nikkei 225.

The BOJ is unlikely to change the amount of assets it buys, which would certainly be a change in monetary policy, according to Yamasaki, "but they could change the contents of what they’re buying."

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