Japanese officials are shifting their approach to intervene in the foreign exchange market, abandoning their habit of signaling intervention risks and instead adopting a more targeted campaign to squeeze speculators and raise the cost of betting against the yen.
Targeted Intervention
The Ministry of Finance (MOF) may step in abruptly to wipe out speculative yen positions, without warning, in an effort to prevent excessive falls in the currency. This approach reflects a more aggressive stance by the MOF, which is using silence as a policy tool to keep traders guessing.
The Bank of Japan (BOJ) has been warning about the inflationary impact of a weak yen, and the MOF’s approach is seen as a coordinated effort to keep yen bears at bay. The BOJ has been ramping up warnings over the inflationary impact of a weak yen, and the MOF’s intervention is aimed at preventing excessive speculation.
Market Impact
The shift in approach has raised the risk of a surprise intervention, driven by an accumulation of speculative short-yen bets rather than by the currency crossing a publicly understood threshold. The MOF’s silence on the matter is seen as a deliberate attempt to keep markets guessing, making it harder for traders to anticipate the next intervention.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
