© Reuters. FILE PHOTO: Banknotes of Japanese yen are seen in this illustration picture taken September 23, 2022. REUTERS/Florence Lo/Illustration

By Tetsushi Kajimoto and Yoshifumi Takemoto

TOKYO (Reuters) – A former top Japanese financial official said on Wednesday yen weakness might be caused not only by interest rate differentials between Japan and the United States but also by structural factors such as a worsening fiscal position.

Under such circumstances, any currency intervention by authorities would not help turn around the market tide to sustain impacts, although smoothing operations may be acceptable, a former vice finance minister for international affairs, Rintaro Tamaki, told Reuters.

“Confidence in Japan’s public finances, falling competitiveness, ageing population and dwindling labour force may be depriving Japanese authorities of the will to conduct bold policy,” Tamaki said, referring to investor concerns.

“I wonder whether overseas investors may be thinking what’s in it for investing in Japan.”

Asked about the possibility of dollar-selling, yen-buying intervention in the foreign exchange market by authorities, Tamaki said a market foray may have psychological impacts but it would not change underlying structural issues.

While in office, Tamaki intervened in the market after a March 2011 earthquake and tsunami devastated much of northeastern Japan and triggered the Fukushima nuclear crisis.

“We intervened in the market to respond to rapid yen rises in order to regain a sense of stability,” Tamaki said. “It was nothing but a smoothing operation. We cannot think of intervention as a means to change currency levels.”