National Australia Bank analysts on the yen intervention Thursday.
- BoJ intervention – that would have been a MoF not BoJ initiative – which drove the pair down to a low of Y140.36.
- Given the now even starker contrast between the BoJ’s policy stance and central banks everywhere else in the world and the fact intervention is working completely against the grain of Japan’s domestic monetary policy stance, MoF will need to be in this intervention game for the long haul and in size if it is to have much hope of arresting JPY weakness in an ongoing strong USD environment.
- And short of resurrecting some sort of SNB style currency peg as the latter did with EUR/CHF (and which ultimately failed, even though the SNB was selling not buying its own currency) the law of diminishing returns will surely set in on BoJ intervention before too long.
Overnight Adam noted the extra challenge the MoF (through the Bank of Japan) faces as it buys its own currency, quite different to selling it:
- Strengthening a currency isn't so straight forward. Your ammunition is limited by your foreign reserves. Japan has $1.3 trillion in FX reserves so it's got ammo. But there's still a limit.
USD/JPY update today: