USDJPY H1 23-09

After the oohs and ahhs following the intervention by Japanese authorities yesterday, there has been quite a number of market commentary calling the move into question - and rightly so. I also shared my own thoughts on that yesterday here. I would argue that traders are still digesting the overall situation but the fact that we are stil hanging around 142 levels for USD/JPY is at least signalling that the market bias is still very much tilted towards an upside move.

And let's be honest. The reasons supporting that are still very much in play with the only reason against being that Japan is going to expend its reserves to try and fight the tide.

I don't envy being in BOJ governor Kuroda's shoes at the moment, really. The central bank has no major excuse to tighten policy considering that economic growth is tepid and inflation is barely above 2% (and for the wrong reasons in fact). And the fact the government wanted to send a message right after Kuroda and his peers decided to maintain ultra loose monetary policy is definitely quite vexing to say the least.

I've mentioned many times before that policy divergence remains the key driver in USD/JPY sentiment and that hasn't changed; intervention or not. So, unless there is reason for the BOJ to shift their policy stance, it may be tough to understand what exactly is the playbook for the intervention by Japanese authorities.

At best, I would believe they are just trying to manage the pace of the decline in the yen. But we'll see.

In any case, we have already seen a long-standing history of failed interventions due to poor coordination and if this is unsuccessful, it will be a major dent to the credibility of both the BOJ and the government. In essence, it will make the central bank's job of managing the market even tougher moving forward.

But I guess Kuroda can be happy with one thing, that being his term is set to end in April next year. Just seven more months I guess.