Japan should limit intervention aimed at weakening the yen because a strong currency will pare the cost of fuel imports as the nation's nuclear capacity dwindles, said Richard Koo, chief economist at Nomura Research Institute in Tokyo.
"Right now, I'm not pushing loudly for intervention," Koo, a former Federal Reserve economist, said in an interview Friday. "It may be to Japan's benefit to keep the yen relatively strong so it can buy cheaper oil to run the power stations."
Radiation leaks triggered by multiple core meltdowns at a Tokyo Electric Power Co. plant in Fukushima Prefecture after the March 11 earthquake and tsunami led to a series of reactor shutdowns across Japan, forcing it to import a record volume of liquefied natural gas and spurring the first annual trade deficit since 1980.
The yen appreciated to a postwar high against the dollar last year, prompting firms like Nissan Motor Co. to shift output overseas and Japan to sell yen at least three times on currency markets. The trade deficit is "a huge excuse" authorities can use to justify a weaker currency, Koo said. "But under the circumstances, when commodity prices are so high around the world, this strong yen is also helping Japan."