Masato Kanda, the former vice finance minister for international affairs in Japan, has spent years battling sleepless nights due to the demands of his high-stakes role. “Three hours a night is an exaggeration,” he chuckles during a recent interview from Tokyo. “I slept for three hours consecutively before being woken up, but I then went back to bed, so if you add them up, I got a bit more.”
Kanda’s responsibilities included safeguarding Japan’s economy from currency speculators, a task that became increasingly challenging during his tenure.
The Weakening Yen and Economic Impact
Historically, Japan has intervened in currency markets to weaken the yen, a strategy beneficial for exporters like Toyota and Sony. However, during Kanda’s three-year term, the yen’s value against the US dollar plummeted by over 45%. This decline significantly increased the cost of essential imports such as food and fuel, contributing to a cost-of-living crisis in a nation typically accustomed to price stability.
To stabilize the currency, Kanda oversaw interventions that released an estimated 25 trillion yen ($173 billion) into the market, marking Japan’s first such action in nearly 25 years.
Market Intervention vs. Manipulation
“Markets should move based on fundamentals,” Kanda argues, defending his actions against claims of market manipulation. “But occasionally they fluctuate excessively because of speculation, and they don’t reflect fundamentals which don’t change overnight. When it affects ordinary consumers who have to buy food or fuel, that is when we intervened.”
Unlike countries like the US and UK, which can raise interest rates to bolster their currencies, Japan has struggled with low borrowing costs due to economic weaknesses, leaving intervention as a primary strategy.
The Irony of Recent Currency Strength
In a twist of fate, the yen’s value has recently increased without intervention from Kanda or his successor. This surge followed a surprise rate hike from the Bank of Japan and the appointment of a new prime minister.
When asked whether his massive intervention was a waste of money, Kanda asserts that it was not. He notes that the interventions even yielded a profit, though he emphasizes that profit was never the goal. “It is not up to me to evaluate, but many say our exchange management stopped the excessive level of speculation,” he reflects.
A Bright Future for Japan’s Economy
Despite the challenges, Kanda expresses optimism about Japan’s economic future. “We are finally seeing investments and wages rising, and we have a chance to go back to a normal market economy,” he states.
Unexpected Fame and a Legacy of Resilience
Kanda’s tenure has not only been marked by financial strategies but also by unexpected fame. He has become a social media sensation, celebrated for his ability to influence financial markets through a series of AI-generated dancing videos that captured the public’s imagination. This unique legacy adds a light-hearted chapter to the serious business of currency diplomacy, illustrating the diverse ways in which public servants can connect with the populace.
(INCLUDES INPUTS FROM ONLINE SOURCES)
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