Yen intervention – Japan’s finance ministry is ready for a long fight

National Australia Bank analysts on Thursday’s yen intervention.

  • The intervention of the BoJ – this would have been an initiative of the MoF and not the BoJ – which caused the pair to drop to a low of 140.36 yen.
  • Given the now even starker contrast between the policy stance of the BoJ and central banks everywhere else in the world and the fact that the intervention runs completely against Japan’s domestic monetary policy stance, the MoF will have to be in this big, long-term intervention game if it is to have much hope of arresting JPY weakness in a still-strong USD environment.
  • And short of resurrecting some sort of BNS-style currency peg like the latter did with EUR/CHF (and which ultimately failed, even though the SNB was selling and not buying its own currency), the law of diminishing returns will surely settle on BoJ intervention before too long.

Overnight, Adam noted the additional challenge the Ministry of Finance (through the Bank of Japan) faces when buying its own currency, which is quite different from selling it:

USD/JPY update today:

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