Scotiabank’s Shaun Osborne and Eric Theoret note that the USD/JPY rate was little changed despite acute verbal intervention from Finance Minister Katayama, who warned against taking decisive action at any time. Markets remain unimpressed given the repeated rhetoric and circumscribed impact of actual yen purchases. They cite recent data showing a significant shift in sentiment towards the Japanese yen among local retail currency investors, who may be more sensitive to intervention risks.
Katayama warnings and expectations for intervention
“The JPY was little changed even though Finance Minister Katayama had previously used aggressive verbal intervention to support his currency.”
“Katayama threatened “decisive action at any time.” “This is one of the strongest warnings of impending intervention in recent weeks.”
“But markets are not impressed, reflecting the frequency of verbal interventions and the ineffectiveness of actual yen buying.”
“However, recall that the latest data reflects a very significant shift in sentiment in favor of the yen among local Japanese retail FX investors who may feel they are at risk of intervention.”
(This article was created with the aid of an artificial intelligence tool and has been reviewed by an editor. Find out more.)
