Deutsche Bank currency analyst George Saravelos isn't holding back in offering a verdict on today's FX intervention from Japan's ministry of finance.

He argues that fundamentals are what's driving USD/JPY higher and that intervention will simply cause an unnecessary loss in Japanese reserves and credibility unless it's accompanied by a pivot from the Bank of Japan.

1) BOJ at cross purposes

"It is simply not credible for a central bank to be debasing its currency via extreme amounts of QE while authorities pursue a stronger FX at the same time"

2) The costs could be enormous

The 1998 intervention cost $3 billion over two days which would be equivalent to $10 billion today. "The market will be interested in seeing the size of intervention which will be released at the end of the month, but if authorities are intent on intervening by more than symbolic amounts, reserve depletion can build very quickly."

3) It didn't work before

Japan 1997-98 intervention
Japan 1997-98 intervention

Japan began intervening to strengthen the yen in Dec 1997 but it kept rising and made new highs in two weeks. In the April 1998 intervention it took about three weeks to make new highs. A third invervention in June 1998 worked "but only because the LTCM crisis quickly followed."

Based on the 1997-98 playbook, the time to buy USD/JPY would be about three days after the intervention. Of course, at that time we weren't witnessing an implosion of the bond market at the same time.