Citi Believes BOJ Will Intervene At USDJPY 76, Says Any Intervention Will Likely Be Insufficient

Tyler Durden's picture

With everyone and their mother now expecting the BOJ to do absolutely nothing courtesy of Noda's now hourly announcements that he is watching the JPY like a hawk, or simply a confirmation that the Japanese central bank is as toothless as the SNB (EURCHF at 1.0952 at last check) to do much if anything, here is Citi's Osamu Takashima, who writes that the BOJ will intervene at a level of 76 on the USDJPY or about 9500 on the Nikkei. Bloomberg All News summarizes the highlights of his note.

  • Possibility of BOJ intervention is much higher if Nikkei and USD/JPY falls to 9,500 and 76, respectively
  • Last 2 BOJ interventions in September 2010 and March 2011 didn’t benefit Japanese exporters as much as margin FX investors, aka Mrs. Watanabe
  • Rough calculations show FX margin players may be holding about 2.8t yen or $36b in short-yen positions
  • BOJ/MOF would need to intervene at least 3t yen or $38b to help Japanese exports

And the reason why another BOJ intervention will need the entire G-7 complex to step in again like they did in March:

  • Japanese exporters keen to sell USD/JPY at 80 level
  • Solo BOJ intervention may lift USD/JPY by only 3 big figures; thus if BOJ intervene around 76, it’s insufficient to reach 80 level targeted by exporters

We believe that selling into any USDJPY strength is the trade here as any 100 pip or so bounce will be promptly sold by the market following the realization that such (un)sterilized interventions now have a half life of a few hours max.

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Id fight Gandhi's picture

Since we no longer have free markets and price discovery, what do you call all of this government intervention in the markets and fiat?

John McCloy's picture

"Central Planners Gone Wild" ?

Debtless's picture

The new normal.

Or the last dance.

Popo's picture

what do you call all of this government intervention in the markets and fiat?


I call it another buying opportunity for FXY.   The Yen will probably stay down for about a week before climbing back up.

DonutBoy's picture

They're still playing nice.  With a 1/10 of the island on it's way to being a radioactive wasteland they could start playing hardball soon.  Hardball looks like this: "BOJ announces official exchange rate of 100 yen / dollar and will exchange any dollars submitted for yen at this rate".   When dollars get submitted they print yen and hand them out.  Then they take the dollars and buy gold.

TSA Thug's picture

I'll take the 100 Yen and buy farmland in The Republic of Ecuador, thank you very much!

Popo's picture

And we stop importing cars.

Global Hunter's picture

These monkeys still think a little tinker here a tinker there and everything will be OK.  They're bankers not alchemists, I just have no idea what is going through their heads and I'd really love to be there in the room when the shoe drops on some of these clowns.

Archimedes's picture

I must admit I don't get this as I am not a currency expert. Where does this newly created money go? Does it just sit in Bank vaults? Japan has been mired in resession for decades and they have printed Trillions in Fiat yet their currency is still coveted and realitively more valuable against other currencies.

Doesn't this poke a small hole in the theory that printing infinite dollars will cause the dollar to become worthless? Especially being the World's Reserve?

Serious replies only please. Thanks!


DonutBoy's picture

The Japanese have had apparently infinite print & borrow capacity because 1) their population of tribal net savers buys their bonds exclusively, and 2) they have had a significant current account surplus, they are net exporters.

Demographically 1) is no longer possible, they are redeeming bonds now and will continue to on their population death spiral.

The must maintain 2) the current account surplus.  The yen rate must allow for profitable exports. 

Global Hunter's picture

In my opinion they're experiencing inflation vs real assets like gold, silver and oil.  They had a highly leveraged real estate bubble, so assets such as property have deflated, as things like equities and real estate deflate capital moves to cash.  

gold priced in Yen 5 years ago was 77,500 today it is 127,000

silver priced in Yen 5 years ago was 1,400 today its 3,100

edit: in short the stuff that was in a bubble and over priced deflates, the stuff that matters inflates. 


tickertapeguide's picture

When Japan was hit by the earthquake, the yen rose, causing those which borrowed in yen to sell assets to return yen.  This resulted in a reduction in equity prices.  Yen borrowing is cheap which is why it is used in the carry trade.  So while a rise in DXY is not good for stocks, cheaper (more abundant) yen is positive for markets in that is is a source of funding if the increase in yen is appreciable enough to move the markets.  Cheaper yen is also beneficial to Japan in that it promotes exports because Japan can sell their products in foreign markets cheaper (just not so good for those foreign markets because then the trade balance swings in favor of Japan and local productivity is decreased due to lack of demand).

TSA Thug's picture

"Doesn't this poke a small hole in the theory that printing infinite dollars will cause the dollar to become worthless? Especially being the World's Reserve?"

Japan is The Blueprint and a prime example why debt-2-gdp fatality is relative to your global sovereign status.

The US can easily go to 300% debt-2-gdp without falter.

Dr. Engali's picture

The difference between Japan and the U.S. though is the debt levels. Nobody can support the amount of debt needed to bring the U.S. to 300% of gdp. Japan is only a 5 trillion dollar economy compared to our 14 trillion.  That would take us to 42 trillion in debt. Who can support that?

TSA Thug's picture

I must admit I am more of a Heterodox economist.

Global Hunter's picture

300% debt to GDP?  You're posts are getting better!!!!

Sgt.Sausage's picture

==> Doesn't this poke a small hole in the theory that printing infinite dollars will cause the dollar to become worthless?

Your dollars have already become worthless. Since the inception of the Federal Reserve in 1913, and the ability to print whenever Congress wants more Monopoly Money - your dollar has lost 97% of it's value ... and that's only if, (and that's a pretty big IF) - if you believe the government published numbers for inflation. If you go with more realistic inflation statistics instead of the hogwash coming from D.C., it only gets worse.

Take the blinders off, dude.

MoneyWise's picture

I'm just curious at what USDCHF level those

Swiss b*chez will complete shut down their

export? :) Who would pay for Swiss made 3 times more?

How about Toyota? Japanese will soon have to

work for free

to be able to sell made in Japan Toyota on USA market.

I'll wait for USDCHF at 0.30 and see what those b*chez

gonna do about it..

swissaustrian's picture

Swiss exporters don´t care about the USD, they care about the EUR.

cossack55's picture

The Swiss DO care about their cows.  Prettiest cows I ever did see.  The bells are a nice touch too.

High Plains Drifter's picture

it looks like the masonic goy networks in japan are deliberately destroying the country through various means. one has to scratch one's head while watching this horror show proceed. it is strange that japanese would do this to other japanese. so therefore one must conclude something else is afoot there and like it is here and the rest of the world, most japanese sheep do not understand it nor do they see it.......they just do what they are told, like the good little slaves that they are and the nation is destroyed.

TSA Thug's picture

Notice that Japan has no TSA. They obey, you do not but you will!

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