Japan: Time for Intervents-Yen? – ING

By FXStreet Research Team at ING, suggests that despite verbal intervention from the MoF last week, the bar for unilateral FX intervention remains high.

Key Quotes

“But if the recent surge in JPY continues, the BoJ may find itself in a difficult position at its next meeting at the end of April.

JPY surges higher, pressure for FX intervention builds. Verbal intervention from the MoF has quickly progressed this week, with officials moving from “monitoring closely” to citing JPY moves as being “one-sided”. Historically, language such as “speculative” or “not reflecting fundamentals” has been the next and final steps before FX intervention.

Yet, the bar for unilateral intervention by Japanese officials remains high. For one thing, PM Abe will be wary of breaking the G20 pledge against competitive devaluations ahead of May’s meeting – where he looks set to push for coordinated action to promote global growth. Besides, unilateral FX intervention has historically been ineffective, with the impact typically short-lived. Only the Mar 2011 intervention following the tsunami crisis in Japan had any enduring effect on the yen; this was almost certainly due to the fact that the move was coordinated with other G7 central banks. With the JPY REER still 30% below …read more

Source:: FX Street