Japan is going to continue to make threats but I still don’t see intervention. Based on the recent comments and today’s talk about helping out in Europe I think the priority right now is to work on a long-term solution.
The causes of yen strength have been cited as uncertainty in Europe and deflation and it appears the favored solution is to combat those factors. If they’re considering investing in Europe, that’s somewhat drastic but not drastic like intervention. At the margin, it’s EUR/JPY positive and could develop into a larger EUR/JPY positive if the aid numbers are substantial.
At the same time, there will always be the possibility of intervention if JPY climbs 300-400 pips.
