This is via a Société Générale note on the weak yen. It comes amidst all the chatter of potential Bank of Japan intervention in the currency (to buy the yen) and the wariness that such intervention by the BOJ, without coordination with the Federal Reserve and/or otherDM central banks is likely to be of only short-term impact, not enough to sustain a yen reversal after its precipitous decline.

SG point to two necessary conditions for a sustained gain for the JPY , warning that stand-alone intervention from the BOJ is not enough:

    • “Unilateral intervention could keep USD/JPY from scaling new highs but won’t be enough to reverse the downtrend.”
    “We see two conditions necessary for a sustainable reversal in the JPY:
  • 1. The Bank of Japan abandons curve control

(this is, in a nutshell, the 10y JGB cap at 0.25%)

  • 2. A recession unfolds in the US and causes US Treasury yields to fall


ICYMI, recent posts on the yen as background and what to watch for.

usdyen 16 September 2022