Timothy Geithner, the former U.S. Treasury Secretary who had extensive dealings with Japan over the course of his career, didn¡¯t place much value in forecasting. He learned as a young diplomat in Tokyo cranking out quarterly economic outlooks that even the best were little more than educated guesses.
The record of detecting turning points in the yen underscores the point Geithner ¡ª a man involved in major interventions to both support and deflate the currency ¡ª made in his memoir. Today, with the yen weakening toward 160 per dollar or even lower, and traders speculating about when Japanese officials might wade in to stem the slide, it¡¯s worth remembering how perilous strong declarations can be. That¡¯s especially true in the foreign exchange market, which has swollen to $9.6 trillion a day.
Finance Minister Satsuki Katayama has stepped up warnings to yen bears. "The government will take appropriate action against disorderly FX moves, including those driven by speculation, as needed,¡± she told reporters late last month. Her team is deeply concerned about what it describes as one-sided and rapid shifts. These characterizations, however, are in the eye of the beholder. In reality, authorities can¡¯t ignore absolute levels, particularly when they approach big round numbers.
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