Intelasia East Asia News – Exchange Rate Verification Reported by BOJ

The Bank of Japan has carried out a rate check in apparent preparation for monetary intervention, the Nikkei newspaper reported on Wednesday, as policymakers stepped up warnings of steep declines in the yen.

MARKET REACTION:

The yen rose slightly from a nearly 24-year low against the dollar after the report, which cites unidentified sources, and traded around 143.89 at 0520 GMT.

COMMENTS:

MASAYUKI KICHIKAWA, CHIEF MACRO STRATEGIST, SUMITOMO MITSUI DS ASSET MANAGEMENT, TOKYO:

“The central bank probably sees recent movements in the yen rate as too sudden and too large.”

“If the market continues to sell yen, there is more pressure for the MOF and BOJ to communicate to the market that the recent move has been too fast.”

“Without the consent of the American side, I don’t think Japan would intervene. I don’t think the US authorities would intervene with Japan, but I think the Japanese side has spoken to their US counterparts, and the US side is not opposed to an intervention by the Japanese authorities.

“Of course, in the short term, intervention could work, if the sense (is) that the market is biased to sell yen, but to change the trend, we have to see a change in the fundamentals.”

CHRISTOPHER WONG, CURRENCY STRATEGIST, OCBC, SINGAPORE

“The verbal jaw may help slow the pace of yen depreciation, but it is unlikely to alter the trend unless USD and UST yields fall decisively or the BoJ does not change or alter its policy.”

“The effectiveness of the intervention would be maximized if it was a coordinated effort and if the uptrend in the dollar were not as strong.”

MASAMICHI ADACHI, CHIEF ECONOMIST, UBS SECURITIES, TOKYO

On the possibility of BOJ action, “No. The simple answer is no.

“What Kuroda has mentioned in the past is that the weak yen is not bad for the economy. And what he has always pointed out in fact is the same as the Ministry of Finance saying they’re not commenting on the level, they’re commenting on the rate of depreciation, and the rate of depreciation of the yen or a strong US dollar is probably speculative, that’s what they all mentioned.

“So the Deputy Minister of Finance, who is in charge of monetary policy, is…declaring that he (will take) the necessary measures, that is, intervention. So I think if the yen depreciates (again) again, (over) the next two weeks, I think I won’t be surprised if the Ministry of Finance intervenes in the market, i.e. buys yen and sell US dollar held in foreign exchange reserves.

KOYA MIYAMAE, PRINCIPAL ECONOMIST, SMBC NIKKO SECURITIES, TOKYO

“Government officials said they were looking at the magnitude of currency movements, rather than the level of exchange rates, and the (recent) big move likely prompted the reaction.”

“A solo intervention can only impact the market in the short term. It’s not that it doesn’t have an impact, but without coordinated action the effect doesn’t last long.

MASAFUMI YAMAMOTO, CHIEF CURRENCY STRATEGIST, MIZUHO SECURITIES, TOKYO

“(If the dollar/yen rises above 145), intervention may become more likely. It’s unlikely…. intervention will have a desirable effect so I think it’s best not to. It’s expected to that the US cuts interest rates next year so just wait until then if the US decides to cut interest rates the yen will even strengthen without the Bank of Japan doing anything.

“Currently, the dollar is strengthening and the yen is weakening due to the large interest rate differentials between the United States and Japan, so it is difficult (for intervention) to be effective. That’s why I think it’s better to wait.

“If the dollar rises above 145 yen, the possibility of intervention will increase to around 60%, from 10% to 20% before, rather than becoming 100%.”

ROB CARNELL, HEAD OF RESEARCH, ASIA-PACIFIC, ING, SINGAPORE:

On the possibility of BOJ intervention, “Never say never. They’ve been stepping up the rhetoric lately. But I would be cautious about the inevitability of their intervention. Japan is a signatory to the G20 and they have non-intervention policies.

“It’s also difficult…unless they stop buying JGBs, unless they increase their exchange rate, it just doesn’t seem believable that they’re going to the G20 to say that the yen is too weak. And intervening could at best buy them a few hours of respite before the market does its bidding again.

TAKESHI MINAMI, CHIEF ECONOMIST, NORINCHUKIN RESEARCH INSTITUTE, TOKYO:

“It is not clear whether the MOF will actually intervene in the foreign exchange market. But doing rate checks indicates that one is ready to intervene to control the strong swings of the yen.

“My feeling is that the MOF will not intervene at this stage and will stick to verbal warnings. There is still a week to go before the Fed’s rate-setting meeting. I don’t think the markets believe the MOF will intervene at current dollar/yen levels.

https://www.Reuters.com/markets/europe/bojs-reported-currency-rate-check-2022-09-14/

Category: Japan


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