(JP) USD/JPY came off its ¥78.24 high after Japan Fin Min Azumi reiterated Japan will take decisive steps if needed on yen, moves are one sided and clearly do not reflect fundamentals. New comment to his statement was, Japan’s view on yen’s rise does have outside support including the IMF.
(JP) Japan government said to be prepared to take every measure with BoJ to prevent vicious cycle of strong JPY and deflation
Note: Comments come from the Growth Strategy document.
How to interpret these headlines?
BOJ and Japanese Ministry of Finance have been stepping up on their rhetoric lately, especially after recent data showing Japanese economy is back into deflation territory and the goal of 1.0% inflation target has now turned into a distant memory. Of course, market does not believe of a BOJ intervention at the current levels, nor does the market believe the sustainability of an unilateral BOJ intervention, as previous instances have shown that unless there is a consensus with the G7, intervention will only last a few days, if even that.
Considering that Japanese officials have been on the wire almost daily repeating the “same” thing over and over, it really makes me wonder what’s the point? BOJ has already become the boy who cries wolf long time ago, their self-imposed cap on asset buying recently costed their credibility, and with the G7 countries focused on the European Crisis, Japan is on its own and the potential for any relieve on the JPY is, for the lack of a better word, nil.
With the above being said, I believe JPY is going to weaken on the potential sentiment change as results of ECB action, and the opposite could be true if ECB fails to act… I would be looking to SELL EURJPY if ECB does not launch a significant program on Thursday as JPY should gain sharply, or I would BUY EURJPY as Euro should gain sharply and BOJ could piggyback into the Euro strength and weaken the JPY substantially on Thursday.
Is BOJ Intervention Coming?
July 31, 2012 by Leave a Comment