9 May 2016
Japan steps up verbal intervention again – MUFG
Lee Hardman, Currency Analyst at MUFG, notes that the yen has underperformed in the Asian trading session as it continues to gradually reverse the initial sharp gains which followed disappointment at the lack of easing from the BoJ at their last policy meeting.
Key Quotes
“The yen has weakened overnight undermined by further verbal intervention from Japanese officials which have raised the perceived risk of direct intervention. Finance Minister Aso stated strongly that sudden yen strength or weakness is bad and that Japan has the means to intervene. He also attempted to alter market expectations that US opposition will prevent Japan from intervening stating that the US doesn’t think Japan’s FX policy is unjustified and that the recent US Treasury report will not affect their FX policy. Instead he emphasized that the G20 agrees that excessive FX moves are undesirable and if moves become too rapid then they need to intervene.
Overall, the comments do not significantly change our view that direct intervention to dampen yen strength remains unlikely in the near-term. More disorderly yen strength would be required to justify direct intervention given international constraints.”
Key Quotes
“The yen has weakened overnight undermined by further verbal intervention from Japanese officials which have raised the perceived risk of direct intervention. Finance Minister Aso stated strongly that sudden yen strength or weakness is bad and that Japan has the means to intervene. He also attempted to alter market expectations that US opposition will prevent Japan from intervening stating that the US doesn’t think Japan’s FX policy is unjustified and that the recent US Treasury report will not affect their FX policy. Instead he emphasized that the G20 agrees that excessive FX moves are undesirable and if moves become too rapid then they need to intervene.
Overall, the comments do not significantly change our view that direct intervention to dampen yen strength remains unlikely in the near-term. More disorderly yen strength would be required to justify direct intervention given international constraints.”