The last time the BoJ were active in the market was in 2004 and prior to that in 1997/1998. On both occasions the intervention went on for an extended period of time and succeeded in driving the USD/JPY considerably higher. That is why at least two big hedge funds have been so active over the last few weeks buying USD/JPY in expectation of some serious intervention. They expect that USD/JPY will reach 90.00 at a minimum and history suggests that they may be right. There will of course be some serious swings during this time so don’t be surprised to hear about these big players appearing on the offer from time to time, just as happened above 85.00 after US economic data a few days ago.
It is also interesting to note that the BoJ does not have the scope to diversify their USD purchases into EUR, GBP etc. These dollars will stay as dollars and hence the USD rally today against the other majors is managing to sustain itself for the moment at least.
