Snip ~ The BOJ has a policy board meeting on Sept. 6-7, but could act sooner with an emergency meeting as it did last August shortly before the first Japan intervention in 6½ years ...
August 21, 2011
Record Level for Yen Raises Intervention Stakes
A rise in the yen to a post-war record has currency traders ready for another round of intervention by Japan as early as Monday morning, amid increased calls for the Bank of Japan to take fresh monetary easing.
The yen hit a new high against the dollar in Friday trading in New York, capping a renewed rise since Japan staged a record intervention of around ¥4.6 trillion ($60.09 billion) on Aug. 4 to try to push the currency lower. The dollar dropped to ¥75.94 after Takehiko Nakao, Japanese vice finance minister for international affairs, said Japan would take a measured approach to intervention in the market.
Although the dollar later recovered to ¥76.55 in late New York trade, essentially unchanged from Thursday, analysts and traders said the pressure was on for the authorities to again wade into the market.
Asked about the yen's strength, Finance Minister Yoshihiko Noda told NHK Television Saturday that he would "respond with sense of urgency in the new week." The Finance Ministry is responsible for deciding on currency intervention, which is then executed by the Bank of Japan.
"Currency investors are fully ready for Japan's intervention; we'll get set from Monday early morning," said Yuji Saito, foreign-exchange market director at Crédit Agricole in Tokyo.
Mr. Saito said Japan may make one concerted effort to bring the dollar back to ¥80, although he said achieving such a large price swing would be costly, requiring massive volumes of yen selling.
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But for intervention to be successful, the move would need to be accompanied by renewed action from the Bank of Japan, according to many political leaders and market analysts.
The BOJ has a policy board meeting on Sept. 6-7, but could act sooner with an emergency meeting as it did last August shortly before the first Japan intervention in 6½ years.
Sadakazu Tanigaki, head of the opposition Liberal Democratic Party, said on NHK Television on Sunday that the BOJ must play a role in helping to weaken the yen.
"This is something we have to think about. We must ask for serious discussions on whether another round of easing in monetary policy can be implemented," said Mr. Tanigaki, a former finance minister.
People familiar with the BOJ's thinking say the central bank is ready to take further measures if necessary.
"The BOJ is ready to act swiftly if it confirms the high yen is starting to hurt business sentiment and threaten the BOJ's main economic scenario," said one person.
Even though the central bank doesn't have a role in exchange rates, the central bank has made clear that the high yen is a worry because of its impact on big industrial exporters and domestic job creation as jobs are shipped offshore.
Japanese manufacturers on average have assumed an average dollar exchange rate of ¥82.59 for the current business year, according to a central bank survey.
Among the limited policy options for the BOJ, the most likely new step would be a further expansion of its asset purchase program that buys a range of assets including government bonds and private-sector funds.
Analysts said Japanese authorities will likely be watching the Tokyo stock market closely on Monday to see if the strong yen is affecting the broader economy.
The Nikkei Stock Average fell 2.5% on Friday to a five-month closing low on a fresh wave of concerns about global growth. The index has skidded 11% so far this month.
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