Source: Gelonghui
Actually, I didn't have a choice
On April 29, in a light market environment during the Japanese holiday season, the yen staged a rare “roller coaster” market.
During the Asian trading session, the dollar once approached the 34-year high of 160 against the yen, but then began to make a U-turn downward, then fell continuously below the five integer marks of 159, 158, 157, 156, and 155.
According to foreign media reports, sources said that Japan's financial authorities interfered in the foreign exchange market to support a sharp depreciation of the yen. The Japanese government interfered with the yen's trend in 2022.
Source: The authorities have taken action!
This “violent” exchange rate trend has led some industry insiders to speculate that the scale and speed of the current rise has the flavor of intervention. However, according to a report by Nihon Keizai Shimbun, on the evening of the 29th, Japan's Finance Minister Masato Kanda stated about the possibility of the Japanese government and the Bank of Japan interfering with foreign exchange:
“I have no comment on whether there is foreign exchange intervention.”
Its vague attitude kept investors speculating. Dow Jones quoted people familiar with the matter as saying that the authorities were involved in buying yen.
Regarding recent fluctuations in the yen exchange rate, he said, “The negative impact of drastic or even abnormal fluctuations caused by speculation on the national economy cannot be ignored.” He added, “We will continue to take appropriate measures as needed.”
At the same time, there are also industry insiders who still disagree that the Japanese authorities interfered. Shoki Omori, chief strategist at Mizuho Securities, said that the sharp fluctuation of the yen against the US dollar on Monday may be due to poor liquidity in Japan's public holiday market rather than actual intervention.
Regarding measures to deal with the weakening yen, he explained,
“We are prepared to respond 24 hours a day, 365 days a year (including the possibility of intervention).”
According to reports, the Japanese government will release data on foreign exchange intervention at 18:00 Beijing time on Tuesday. Monthly announcements generally do not include data for the last few business days of each month.
In other words, if we want the Japanese government to interfere in the market on Monday, we will have to wait for official data at the end of May.
When asked if this was not an intervention by the government or the Bank of Japan, but rather the Bank of Japan cooperating with the government to buy yen, he simply said, “I have nothing to say about what exactly they are doing.”
The challenge of Japanese government intervention in monetary policy
The Japanese government faces challenges in monetary policy intervention, and Prime Minister Fumio Kishida's cabinet must deal with market expectations that the Federal Reserve will maintain high interest rates, which may increase the attractiveness of the US dollar. Yusuke Miyairi, a foreign exchange strategist at Nomura International, predicts that unless the macroeconomic situation changes, the USD/JPY exchange rate may once again hit the 160 level.
Citigroup analysts believe that the Federal Reserve's decisions and key economic data will receive close attention from investors to determine whether the US economy is showing signs of weakness. They forecast that the USD/JPY exchange rate will fluctuate between 155 and 160.
Lord Abbett & Co's portfolio manager Leah Traub pointed out that the performance of the yen is closely related to the interest rate spread between the US and Japan, and believes that the Bank of Japan and the Ministry of Finance need to change their policy guidelines to prevent further depreciation of the yen.
The Federal Reserve is likely to send more hawkish signals this week, and Friday's US non-farm payrolls data for April will be the focus of the market.
Weak economic data may affect the Federal Reserve's policy expectations, thereby having a positive impact on Japan's Ministry of Finance. Tom Fitzpatrick of R.J. O'Brien & Associates warns that intervention without policy support is dangerous. Mark Dowding, chief investment director of Royal Bank of Canada's BlueBay Asset Management Company, said that after the Bank of Japan kept interest rates unchanged, they ended their bets on the strengthening of the yen and believed that increasing the yen would be expensive in the current interest rate spread environment.
Dowding also mentioned that BlueBay recently structured a long position transaction between the yen and the euro, and emphasized that the timing of the introduction of the selection policy is critical to investment decisions. He expects 10-year Japanese Treasury yields to rise, and believes that the Bank of Japan's decision on Friday was a mistake because the central bank should have adopted a more aggressive policy.