“For the third time in less than a year, Japan intervened in foreign-exchange markets to sell the yen.
“In tandem, the Bank of Japan cut short a scheduled two- day meeting and marginally eased monetary policy further. Although this complements the FX intervention effort, the easing is too timid to impact the yen materially.
“It is not yet clear whether today’s efforts are designed to slow the yen’s gradual advance or to defend a line in the sand. Clearly, any attempt to engineer a reversal of the yen’s multi-year strengthening trend is likely to end in failure.
“Japanese authorities are aware of this, and so likely have more modest ambitions. Pushing dollar-yen back to levels that prevailed before the U.S. debt limit became an issue is probably a reasonable short-term aim - somewhere in the region of 79.”
On new Japanese officials:
“Two days ago Takehiko Nakao succeeded Rintaro Tamaki as Vice Finance Minister for International Affairs, thus inheriting operational responsibility for intervention. This change in personnel could herald a significant departure from the recent approaches.
“Noda has already pointed to tactics deployed in the 1995 as ‘a very useful reference’ for current thinking. That involved an eight-month campaign of sporadic and sometimes daily interventions, and investors should probably brace themselves for more of the same.”
To contact the reporter on this story: Nicholas Reynolds in Tokyo at firstname.lastname@example.org
To contact the editor responsible for this story: Rocky Swift at email@example.com