USD/JPY is showing surprisingly little sustained reaction to a Nikkei report which suggests that the BOJ and MOF are contemplating a combination of fresh easing and unilateral intervention.
There are likely too reasons for this. First, the market has what i like to call “beer muscles”, drunk from the success it has had shorting USD/JPY in recent months with little reaction to Japanese jawboning. Second, and more likely in my view, is that Japanese investors and exporters are still stuck long USD/JPY and are desperate to get out on any bounce, no matter how weak.
I take the threat from the Japanese authorities as significant. The BOJ may not be able to turn the market significantly higher on a sustained basis but they could hurt the specs enough to buy some time in the hope that traders look for easier targets elsewhere…
