TOKYO, Aug 17 (Reuters) - Tokyo does not need to take action now to stem the yen's strength given that it is not rising rapidly, a former senior Japanese finance ministry official said, even as the currency hovered near a 15-year high against the dollar.
But former Japanese currency policy chief Hiroshi Watanabe also said that Japan may step into the currency market, possibly on its own, if the yen climbs about 3 yen against the dollar in a day.
Watanabe added however that the Japanese currency is unlikely to rise sharply above 85 yen versus the greenback and that it may reverse its course, attributing the current yen rise to investor attempts to reduce their holdings of the dollar and the euro.
"Overseas players are buying the yen with their eyes closed until they have dissolved their overweight positions in the euro and the dollar, but no one thinks the Japanese economy is in good shape," Watanabe, now the head of the state-backed Japan Bank for International Cooperation (JBIC), told Reuters in an interview.
"It will reverse its course before long."
Watanabe served as vice minister for international affairs for three years until July 2007.
Japan's authorities haven't intervened to protect exporters from a strong currency since March 2004, when a 15-month yen selling spree came to an end.
Currency market intervention is seen as difficult, whether jointly or alone, although market players say the risk of solo action increases the closer the yen gets to 80 per dollar and if its rise accelerates to a pace of 2 to 3 yen per day. (Reporting by Tetsushi Kajimoto and Yuko Yoshikawa; Editing by Joseph Radford)