India shouldn’t worry about Re fall: Mr Yen

ONE-ON-ONE Mumbai: Eisuke Sakakibara, a former Japanese minister of finance and economist, known as 'Mr Yen' because of his ability to move currency markets during the '90s, advises the Indian government to take advantage of the falling rupee by boosting exports and not to fret about it. The currency depreciation is a worldwide phenomenon caused by "simultaneous recession" in global economy, he tells TOI on a visit after becoming a board member at investment bank Avendus Capital.  You are here in the midst of what some people call an Indian currency crisis. What are your views on rupee's  steepest fall ever in recent months?  What is happening right now is repatriation. Funds are now returning from emerging economies to US because of simultaneous recession worldwide. There's a flow from equities to bonds. It's a worldwide phenomenon triggered by the euro crisis. India is running a current account deficit and capital inflows supported the currency so far. So as long as capital continues to flow out, this depreciation will continue. How long...is uncertain. If I were the Indian government, I would tell the Indian people, 'Don't worry because it is to do with repatriation and not because of any weakness in the Indian economy' and try to take advantage of the situation by increasing exports.  Do you think the euro will  survive as a single currency? How do you see the future of the Eurozone?  Germany and France forged European integration in the post-War era. But it's beginning to disintegrate because of the Greek crisis and the US crisis. I think the problem is structure. The Greek crisis has been temporarily suspended but it's spreading to Spain and perhaps Italy. So the integration is at risk and this is a structural problem and I don't see any immediate way out of the European crisis. The crisis will continue and eventually hit European banks. Because bonds of south European countries are plummeting, the balance sheet of banks are deteriorating. I think it is a possibility that some French, German or Italian banks may have a problem and the fiscal crisis may eventually become a financial crisis. I would not be surprised if a major financial institution in Europe goes bankrupt.  A lot has been said about Japan's debt that's running at about 200% of its GDP…  It's true that debt is high but Japan is not in a financial crisis. While the debt is 180% of the GDP, the accumulated assets of the Japanese households is almost 240% of the GDP, which more than covers up the debt. And most of that debt is owned by Japanese institutions unlike in the case of US, where more than 70% of its debts are in the hands of foreigners.  There's rising interest of  Japanese corporates in  India. How do you see the  Indo-Japanese deal corridor shaping up?  Yen has been strong and I see it that way for a while, giving the Japanese companies enough comfort to pursue international acquisitions. They have gone into China in a big way, but are now talking about China Plus One strategy. That's bringing lot of focus on the Indian market where they see better longer-term growth. India's younger population will sustain longer growth, possibly even 20 or 30 years after China peaks off. Japanese conglomerates, aided by low cost of capital, normally look at the long horizon. Eisuke Sakakibara ECONOMIST & EX-JAPANESE FM