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The man behind Japan’s $170bn bid to prop up the yen

For several years, Masato Kanda could not sleep.

“Three hours a night is an exaggeration,” he laughs as he speaks to the BBC from Tokyo.

“I slept for three hours straight before being woken up but I went back to bed, so if you put them together, I got more.”

So why was this 59-year-old bureaucrat system so punishing?

Until late July, he was Japan’s vice finance minister for international affairs, the country’s chief financial officer, or yen czar.

Central to the role was fending off money market speculators who could cause chaos in one of the world’s largest economies.

Historically, the authorities intervened to weaken the value of the Japanese currency. A weak yen is good for exporters such as Toyota and Sony as it makes goods cheaper for overseas buyers.

But when yen decreased when Mr. Kanda was in power, he increased the price of the purchase of essential goods such as food and fuel from other countries, which caused the cost of living in a country that is used to seeing prices go down rather than up.

In his three years in office, the value of the yen against the US dollar weakened by more than 45%.

To manage the yen’s slide, Mr Kanda launched an estimated 25 trillion yen ($173bn) to support the currency, marking Japan’s first such intervention in nearly a quarter of a century.

“The Bank of Japan and the Ministry of Finance are very clear. They do not intervene at a certain level of currency, but they intervene when the market volatility is too great,” said economist Jesper Koll.

Japan now finds itself on the US Treasury’s watch list of potential currency manipulators.

But Mr. Kanda says what he did was not market manipulation.

“Markets should move based on fundamentals but sometimes they fluctuate a lot due to speculation, and they don’t show fundamentals that change overnight,” he said.

“When it affects ordinary consumers who have to buy food or fuel, that’s when we intervene.”

While countries like the US and the UK could raise interest rates to increase the value of their currencies, Japan had been unable to pay borrowing costs for years due to its weak economy.

Professor Seijiro Takeshita of Shizuoka University says Japan had no choice but to intervene in the currency markets.

“It’s not the right thing to do, but in my opinion it’s the only thing they can do.”

The irony is that the value of the yen has jumped in recent months without Mr Kanda or his successor raising a finger after that. The Bank of Japan surprised markets with a rate hikeagain the country got a new prime minister.

So was the $170bn bid to prop up the yen a waste of money?

No, says Mr Kanda and points out that his intervention has actually been beneficial although he insists it was not a goal.

Regarding whether his actions were ultimately successful or not, he says: “It is not for me to check, but many say that our exchange managers should stop speculating too much.”

Markets or historians should be the final judges, he adds.

After decades of economic stagnation, Mr Kanda is also optimistic about Japan’s prospects.

“Finally, we see investment and wages rising, and we have a chance to return to a normal market economy,” he said.

The most impressive legacy of this “humble civil servant” is that he became an internet star after Japanese social media users celebrated his ability to wow the financial markets with a series of AI-generated dance videos.


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