After months of speculation the Bank of Japan (BOJ) finally took on the foreign exchange markets. As a recent low against the dollar BOJ quickly entered the market instantly driving yen up to 2%. On that day he finished 3% higher and the dollar.
Over the past few weeks Japan slowly soon intervention. [In fact, I was eager to write a post yesterday on intervention in the near future, but that's neither here nor there ...] Minister of finance, Central Bank Governors, members of Parliament and the Prime Minister began to become increasingly vocal Yen un-halting sea and the need to fight it.He said the 15-year high and only 4% of the lowest. Rhetorical intervention and the easy monetary policy, in the absence of the Bank of Japan to sway investors sold nearly $ 20 billion worth yen on the open market.
It is no coincidence that the intervention was carried out by only one day after the parliamentary vote to see whether Naoto ?shima Kan be replaced as Prime Minister. Defeat of Ichiro Ozawa and apparently that survived the challenge, Kahn was determined to make his promise of saving the economy from another recession.(Only a few days ago, he admitted, "we are holding negotiations, so that other countries will not say negative things, when Japan stands for. Now We examine various scenarios, exploring the possible answers in the markets in which we act decisively. ")
Reaction has been mixed. On the one hand the fact that you have been waiting before stepping is proof that the measure of despair. According to the billionaire investor George Soros "Japan was to act to reduce the value of the yen.Of course they're not hurting because currency is too strong, so I think they have the right to intervene ". "Politicians and decision makers, on the other hand, has not been so kind. One u.s. Senator, called an "alarming" step and Jean Claude Trichet, President of THE ECB, said that ' not … appropriate. "
Of these fragments, it is clear that the intervention is carried out unilaterally and lacks any support from the other central banks. Thus if you continue to sell yen, it will make it possible even with open insult other central banks.At the same time, it seems, some confidence that can back off Yen at present. This is because THE BOJ is trying to make own yen, unattractive, to the extent possible, the decline in interest rates and an attempt to accelerate the rate of inflation.Yet it is not clear whether investors take the hint and stop and come back Yen currency financing using the carrying trade.(Despite the unraveling in the past two years, the Yen carry trade may still exceed $ 500 billion).Japan also has to contend with China by upward pressure on the yen, buying Japanese bonds.
The answer is not clear, even, if you will continue to interfere. maybe he just wanted to signal to investors, indicating that it might weaken the yen anytime he wants. in addition, it will be expensive long campaign, hold yen and are doomed to fail in the long run, you learned the hard way in 2003-2004, probably on the recent failure of the Swiss National Bank to weaken Frank on the other hand you need to show investors that it seriously, and "shock and awe" campaign intervention is probably the only real way to achieve this goal.
In any case, I think it's fair to say that those who rate for the yen to do so at your own risk ... though I don't think the yen, suddenly is going back to 100 JPY/USD, the fact that my personal reserves, almost not huge as the Bank of Japan means that I don't tend to place bets in it…
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