(Bloomberg) -- The yen could strengthen to 95 against the dollar in the first half of the year and the Bank of Japan would likely have to respond even if it couldn't do much about it, a former BOJ official said.
China's economic slowdown, the U.S.-China trade war and Brexit could all send global investors fleeing to the yen, a haven in times of market turmoil, Shigeto Nagai, former director general at the central bank, said in an interview.
Nagai's views roughly aligned with similar recent comments by a BOJ ex-chief economist and former executive director. Like them, Nagai said he thought the BOJ had few tools to effectively respond to a stronger currency after almost six years of massive stimulus.
Read more about ex-BOJ official's views on the yen
Yet BOJ Governor Haruhiko Kuroda will feel compelled to try something, since a weaker yen has bolstered sentiment among Japanese companies and allowed executives to draw up longer-term business plans, said Nagai, now head of Japan economics at Oxford Economics. Simply standing by while the yen strengthens will confirm to business leaders that nothing can be done, he said.
The yen will be at 108 per dollar at the end of this year, according to a median estimate of currency analysts. It traded at 109.83 against the dollar Monday afternoon in Tokyo.
--With assistance from Yuko Takeo.
To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net;Masahiro Hidaka in Tokyo at mhidaka@bloomberg.net
To contact the editors responsible for this story: Brett Miller at bmiller30@bloomberg.net, Henry Hoenig, Paul Jackson
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