Europe South Asia Asia Pacific Americas Middle East Africa BBC Homepage World Service Education



Front Page

World

UK

UK Politics

Business

Sci/Tech

Health

Education

Sport

Entertainment

Talking Point

In Depth

On Air

Archive
Feedback
Low Graphics
Help

Wednesday, July 7, 1999 Published at 16:18 GMT 17:18 UK


Business: The Economy

'Mr Yen' stands down

The man who could move the currency markets

The retirement on Thursday of Japan's most senior official dealing with the international economy marks the end of an era in economic co-ordination.

For the last decade Eisuke Sakakibara has been to the world's currency markets what Alan Greenspan is to interest rates - the key player whom everyone listens to.


[ image: Eisuke Sakakibara managed the yen for half a decade]
Eisuke Sakakibara managed the yen for half a decade
His words moved markets, sometimes with dramatic swings.

But on Thursday he finally steps down, replaced by his soft-spoken deputy Haruhiko Kuroda.

Mr Sakakibara's power was as much to do with his personality as his official position as Vice-Minister for International Finance.

In a world of consensus politics, Mr Sakakibara was outspoken and willing to be quoted on the record.

And he represented the strong sense of shared purpose by the Japanese government bureaucracy, which ran the country's economic policy virtually regardless of who was Prime Minister.

Mr Kuroda is expected to maintain Mr Sakakibara's current policy of weakening the yen to boost exports by big Japanese companies.

But he may have less influence on the big questions of re-organising the world financial system after last year's crisis, and he is less close to US Treasury Secretary-designate Lawrence Summers.

International co-ordination

Mr Sakakibara, who said he spoke to Mr Summers on the telephone every day, represented the generation of officials who believed fervently in international co-ordination to manage the currency markets.

That tradition goes back to the Plaza Accord, the agreement reached in a New York hotel in 1985 to weaken the soaring dollar.

More recently, Mr Sakakibara was the key official involved in the wild ride of the yen against the dollar in the last half-decade, first boosting and then weakening the Japanese currency by his remarks and market actions.

Just before the world economic crisis broke, the dollar had plummeted to a new low of around ¥80 to the dollar, and Mr Sakakibara won his spurs by engineering its rise.

Boosting the yen

But as confidence in Japan's recovery waned, and the US economy soared, that position was reversed.

Most of his past two years have been spent in a fruitless attempt to boost the yen and reassure the world that the Japanese economy is on the mend.

Those efforts ended in failure one year ago when the US Government was forced to intervene to rescue the yen, which had fallen to a record low of ¥147 to the dollar.

The new Japanese Government, partly at Mr Sakakibara's urging, did pass a significant measure of banking reform, and several packages designed to reflate the economy. But Japan's economy continued to decline deeper into recession.

Mr Sakakibara attacked the US economy, saying that it was also a "bubble-economy".

Finally, in February, the Japanese Government bowed to the inevitable. A weak yen, coupled with interest rates that approached zero, was now the only hope of economic recovery.

As ever, it was Mr Sakakibara who announced the change.

"It is natural for the yen to depreciate on monetary easing. We welcome this," he told the financial markets.

And as so often, the intervention was successful. So far the Japanese government has succeeded in holding the yen at around its target rate of ¥120 to the dollar.

Mr Sakakibara has not always made the right call on world currency markets. His predictions that the euro would rise to become a rival to the dollar have not, so far, been fulfilled.

Saving global capitalism

In recent months Mr Sakakibara has played a prominent role in the discussions about international financial restructuring.

He argued that the main industrial countries should work together, pegging exchange rates and providing support for weak currencies.

"Otherwise, the 21st century could become the century of major turbulence and collapse of global capitalism," he said.

He was also highly critical of the International Monetary Fund's role in the Asian crisis, and attacked the "Washington consensus" of free market reform.

But his - and Japan's - position was rejected by the United States, which succeeded in imposing a more laissez-faire vision of global economic reform on the world's stage.

Unusual combination

Mr Sakakibara, like many Japanese finance officials, was educated in the United States, where he received his PhD from the University of Michigan.

He briefly taught at Harvard along with Lawrence Summers, but has spent nearly his entire life within the bureaucracy after graduating from the elite Tokyo University.

His successor and current deputy, Mr Kuroda, was educated at Cambridge and prefers to quote Tolstoy to polemical economic arguments.

It will be a contrast that the world's currency markets will need to get used to.





Advanced options | Search tips




Back to top | BBC News Home | BBC Homepage | ©


The Economy Contents


Relevant Stories

14 Jun 99 | The Economy
Japan acts to stem rise of yen

16 Feb 99 | The Economy
Japan surprises world markets

09 Jun 98 | The Economy
Pressure continues on Asia's currencies





Internet Links


Japanese Finance Ministry


The BBC is not responsible for the content of external internet sites.




In this section

Inquiry into energy provider loyalty

Brown considers IMF job

Chinese imports boost US trade gap

No longer Liffe as we know it

The growing threat of internet fraud

House passes US budget

Online share dealing triples

Rate fears as sales soar

Brown's bulging war-chest

Oil reaches nine-year high

UK unemployment falls again

Trade talks deadlocked

US inflation still subdued

Insolvent firms to get breathing space

Bank considered bigger rate rise

UK pay rising 'too fast'

Utilities face tough regulation

CBI's new chief named

US stocks hit highs after rate rise

US Fed raises rates

UK inflation creeps up

Row over the national shopping basket

Military airspace to be cut

TUC warns against following US

World growth accelerates

Union merger put in doubt

Japan's tentative economic recovery

EU fraud costs millions

CBI choice 'could wreck industrial relations'

WTO hails China deal

US business eyes Chinese market

Red tape task force

Websites and widgets

Guru predicts web surge

Malaysia's economy: The Sinatra Principle

Shell secures Iranian oil deal

Irish boom draws the Welsh

China deal to boost economy

US dream scenario continues

Japan's billion dollar spending spree