(Bloomberg) -- A victory by Donald Trump in the U.S presidential election is unlikely to trigger moves in the yen that would warrant action by Japanese authorities, said Hiroshi Watanabe, president of the Institute for International Monetary Affairs and a former currency chief at the Ministry of Finance.
A Trump win would likely prompt investors to move to assets perceived as offering safety, he said, causing stocks to drop. However, any volatility in the yen would be short-term, so neither the government nor the Bank of Japan would be forced to act.
The yen is considered a haven by investors and its value often rises rapidly during periods of uncertainty. It appreciated sharply when the British voted to leave the European Union this summer, briefly breaking through 100 versus the U.S. dollar. The yen has been among the best performing major currencies this year, gaining 16 percent as of 4 p.m. Friday in Tokyo.
A weaker yen has been a key objective of Prime Minister Shinzo Abe's economic program. The Ministry of Finance watches the currency closely, and often comments if its movements are seen as "disorderly." The U.S. Treasury kept Japan on its currency watch list last month, citing "persistent public comments by Japanese authorities aimed at restraining yen appreciation."
Watanabe also said the Federal Reserve was not likely to raise interest rates in December, citing concerns about the quality of jobs being created in the U.S. "In the past few years, there's almost no one who is convinced the economy is solid. Yellen's not at all satisfied in terms of solidifying the quality jobs she's thinking about," he said, referring to Fed Chair Janet Yellen.
On the BOJ's recent policy meeting, when the central bank trimmed its inflation forecasts, Watanabe highlighted the difficulty of achieving the BOJ's target of 2 percent inflation in Japan.
"I've thought 2 percent was impossible from the beginning," he said. A target of 1 percent would have been more realistic, he said, but with other countries targeting 2 percent, Japan had little choice but to also choose 2 percent.
To contact the reporters on this story: Connor Cislo in Tokyo at ccislo@bloomberg.net, Kyoko Shimodoi in Tokyo at kshimodoi@bloomberg.net. To contact the editors responsible for this story: Brett Miller at bmiller30@bloomberg.net, Henry Hoenig
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