There is an increasing school of thought that the Mof/BoJ activity in USD/JPY last week was as much a reaction to Chinese activity in the Japanese financial market as it was to general speculative activity.
China has been a heavy buyer of JGBs over the last year although this buying has levelled out over the last few months. They remain however a heavy net buyer of shorter term Japanese bills. There was also the case a few months back when China was selling “your amount” of USD/JPY around the 92.75 level and the market fell like a rock thereafter.
With the large increase in trade between China and Japan, the CNY/JPY rate is becoming of increasing importance to both parties and the MoF does not want the same to happen to them as has happened to the US.
None of this intervention in markets is good for stability so the world must come up with some way of making China play by the rules or the strain could become too big to bear.
