Intervention Risks Rise as Yen Stays Strong, JPMorgan Says

Junya Tanase, chief currency strategist at JPMorgan Chase & Co. in Tokyo, comments on the possibility that Japan will intervene in currency markets after the yen surged to a postwar high.

The Bank of Japan has injected 33 trillion yen ($416 billion) into the banking system this week, trying to settle markets following an earthquake on March 11 that was the most powerful on record and triggered a tsunami that killed thousands and damaged a nuclear plant on the northeastern coast.

The yen has surged as the risk of radiation leaks from the crippled plant stoked prospects insurers and investors will redeem overseas assets to pay for damages. Japan’s currency pared gains today, and traded at 79.17 against the dollar at 11:51 a.m. in Tokyo from 79.59 in New York yesterday.

“Concerns about the reactor accident have proven to be stronger than expected. The yen is being slowly bought up, and stop-loss purchases have been accelerating. Most of the panic buying that occurred this morning may have been due to the rewinding of positions. The buying basically won’t become a trend. I won’t deny the possibility that the yen will enter another phase of strengthening. It may move past 76 into 75, but the chance that it will go beyond that are low.

“I’ve long been pessimistic about foreign-currency intervention, but there is no mistaking that the moves have been significant. If the Nikkei 225 Stock Average drops considerably, intervening in currency markets could be justified on the grounds of reassuring investors.

“Currency moves may have a major effect on the Bank of Japan’s monetary policy. If the yen were to surge, we can say that the possibility of further monetary easing by the central bank will increase.

“While the chance of intervention has gone up, it would have an extremely minimal impact on currency trends that are underpinned by economic fundamentals. Conditions making people risk-adverse will continue, and in the midterm, conditions that are conducive to keeping the yen strong won’t change.”

---With translation by Taku Kato in Tokyo. Editor: Rocky Swift

To contact the reporter on this story: Hiroko Komiya in Tokyo at

To contact the translator on this story: Taku Kato in Tokyo at;

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