Former Japanese FX "Chief": Yen May Be Undervalued by 20%, Bears Should Still Beware of Intervention Risks

Odaily Planet Daily News: Tatsuo Yamazaki, former Vice Finance Minister for International Affairs and Japan's former top foreign exchange official, said in an interview on Monday that the yen should appreciate by as much as 20% from current levels (to around 130 yen to the dollar), pushing back against the view that the yen could weaken further.

"This is no longer a matter of fundamentals, but how market expectations shift. But we are approaching a climax," Yamazaki said. He believes that the current estimate that the yen is undervalued by 10% may be conservative. "I wouldn't be surprised if the yen rises to around 130. To be honest, that's my view."

Meanwhile, Yamazaki suggested that the market should not misinterpret the recent apparent calmness of Japanese authorities as complacency. "They have issued warnings. Anyone still holding short yen positions knows they face the risk of punishment by intervention - that is, being forced to cover their positions. The Ministry of Finance has moved beyond the warning stage, and authorities have shown they are willing to act," he said. (Jin Shi)