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`Mr. Yen' Sakakibara Says
Yen Carry Trade Bubble Must End

June 22, 2007 (EIRNS)—Speaking at the Federal Reserve Bank of San Francisco on June 21, Eisuke Sakakibara, the former Japanese Ministry of Finance official who is known as "Mr. Yen," said that "Japan's interest rates are absurdly low and creating a carry-trade bubble, and this is very dangerous." He added, "The cheapness of the yen has reached absurd levels, and the only cause for that is low interest rates.... The Bank of Japan needs to normalize interest rates as quickly as possible." He suggested that the yen interest rates be increased from the current 0.5 percent to 1.25 percent within the year (i.e., in less than six months).

The current Governor of the Bank of Japan, Toshihiko Fukui, has called for raising Japan's interest rates to stop the very real threat that the yen carry trade, in the hands of international hedge fund speculators, could blow up the world financial system. However, at last week's BOJ meeting, Fukui held back on raising rates until later in the year, leading to a further fall in the yen and an increase in the carry trade.

Lyndon LaRouche last week backed Fukui's attack on the hedge funds, but added that it is urgent for Japan to "end the carry trade altogether and raise interest rates to international levels." Continuing, he said that every time Japan postponed raising rates for fear it would undermine the international financial system, that system simply got worse.