Japan has little to cheer on weak yen, says former currency diplomat Furusawa

But monetary policy is not the right tool to curb yen falls, Furusawa said, brushing aside speculation that recent yen declines might prompt the central bank to raise interest rates.

“It‘s not good if the value of a country’s currency keeps sliding,” Furusawa told Reuters on Thursday, describing the weak-yen trend as reflecting Japans waning competitiveness.

“Responding to a weak yen with monetary policy isnt right,” he said, adding that the Bank of Japan will keep interest rates ultra-low to ensure inflation sustainably hits its 2% target.

Furusawa oversaw Japan‘s currency policy in 2013-2014, when BOJ Governor Haruhiko Kuroda’s “bazooka” stimulus pushed down the yen and bolstered shares. His remarks point to changes in how Tokyo policymakers see a weak yen – once welcomed as giving Japans export-reliant economy a boost.

The yens real, effective exchange rate – an indicator that captures the international competitiveness of a currency – has slid to less than half the peak level of 150 hit in 1995.

The Japanese currency has lost around 8% against the dollar in March, dropping to a six-year low below 125 on Monday.

Some market players see 125 yen to the dollar as a level that raises alarm among Japanese authorities, as a previous drop to that level triggered verbal warnings by BOJs Kuroda.

But Furusawa said the speed of yen moves, rather than the currencys level, were more important for policymakers in deciding whether to intervene in the market.

The dollars spike to 125 yen on Monday was “quite big,” which is why incumbent currency diplomat Masato Kanda toned up his warning the following day, Furusawa said.

“Its meaningless to set a certain line-in-the-sand for currency levels,” said Furusawa, who retains close contact with overseas and incumbent Japanese policymakers.

After his stint at Japan‘s finance minister, Furusawa served as deputy managing director of the International Monetary Fund until 2021. He is currently president of the Institute for Global Financial Affairs at Japan’s megabank SMBC.