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Japan needs to cool yen rise: analysts
Publication Date : 12-10-2013
The Bank of Japan (BOJ) will have to come up with plans to temper an expected rise in the yen in the event of a US debt default, analysts said, even as the central bank's officials said a US debt default is unlikely.
The Tokyo Stock Exchange, too, has not revealed what plans, if any, it has in place in the event of a default, although it is aware of moves by the Hong Kong bourse to get traders to put up more money when using short-term US Treasury bills (T-bills) as collateral.
A US debt default would throw the yen depreciation programme by the BOJ into disarray and threaten the nascent economic recovery in Japan.
But a BOJ official told The Straits Times he had confidence that the US government will be able to solve its debt ceiling problems, echoing BOJ governor Haruhiko Kuroda, who said in New York on Thursday: "I don't think there will be a US debt default."
The media here, appearing to take its cue from the officials, have said little on how the world's second-largest holder of US T-bills, standing at US$1.108 trillion as of June, will respond if the unthinkable happens, with news reports focused on the US meanderings towards a solution.
The market, too, appears confident of a US solution, with the exchange rate falling to 98.3 yen to the US dollar, sliding for the fourth session in a row.
Japan market watcher Alvin Liew said that in the event of a US default, the BOJ will need to temper a yen surge.
But he noted that while the Tokyo Stock Exchange could take the cue from its Hong Kong counterpart in asking traders to put up more collateral or cash when using short-term US T-bills, the additional two percentage points shaved off their value is unlikely to be a meaningful measure.