Currency Intervention, Bitches

After a six year wait, the BoJ has finally had enough of the Federal Reserve's endless manipulation and has itself intervened in the currency market. The USDJPY jumps over 150 bps, the Nikkei surges 250 pts (that ES-Nikkei convergence or whatever the hell it was is closing soon) as the BOJ sells between 200 and 300 billion worth of yen. Yes, this is the time to short, short, short because if the now useless SNB interventions have taught is anything it is that central banks are populated by pompous morons who believe they can control the world, when the best thing they can do is hope for the last Viagra shot to result in priapism. For those who have taken Psych 101 - look up learned helplessnes. Next up - the SNB, and after that the Fed once again, and after that, the slow but sure end of fiat. The race to the currency devaluation bottom is now in the third and last lap. And incidentally, for all those who missed it, the BOJ's intervention is a symbolic capitulation,  and the beginning of the end for the Keynesian system. Rejoice.

And here is what can only be classified as the funniest self-propagating, feedback-looping, confused fractal tick chart seen in a long, long time:

And here is the thingy from Reuters, confirming the BoJ's penis envy:

Japan intervened in the currency market on Wednesday for the first time in six years, selling yen to stem a rise in the currency that is threatening a fragile economic recovery.

Finance Minister Yoshihiko Noda confirmed the intervention in a news conference, saying Tokyo was also communicating with authorities overseas but indicating that Japan acted alone.

Noda declined to comment on whether the intervention, the first since March 2004, was to buy dollars for yen, but two traders said the Bank of Japan appeared to have bought dollars around 83 yen.

"We will take decisive steps if necessary, including intervention, while continuing to closely watch currency market moves from now on," Noda told reporters at a hastily arranged news conference.

The dollar, which had hit a 15-year-low at 82.87 yen <JPY=> earlier in the day, spiked one yen higher and was trading up 1.6 percent on the day at 84.50 yen.

Prime Minister Naoto Kan's government has been trying to talk down the yen but until Wednesday had stopped short of intervening in the markets, apparently worried that acting without Group of Seven partners would not be very effective.

Kan was re-elected ruling party leader on Tuesday, decisively fending off a challenge from powerbroker Ichiro Ozawa, an outspoken advocate of intervention.

15-YEAR HIGH

"There were views in the market that Kan was more tolerant of a higher yen and the yen rose after he won the ruling party leadership vote yesterday," said Yasuo Yamamoto, senior economist at Mizuho Research Institute.

"The government probably wanted to stamp out those views. But the question is: Will the yen stop rising from here? It's not clear."
Japan has not intervened in the foreign exchange market since March 2004 after a 15-month, 35 trillion yen ($421.7 billion) selling spree aimed at preventing a strong yen from snuffing out an economic recovery.

But the yen has surged to its highest against the dollar since 1995, as low U.S. interest rates have made the dollar cheap to borrow and sell for higher-yielding assets, bringing the Japanese currency closer and closer to its record peak of 79.75 per dollar set in 1995.

The yen's rise has weighed on the Tokyo stock market's Nikkei average, which climbed 1.8 percent on the day as news of the intervention spread.

The euro rose 1.5 percent to 109.65 yen.

The Bank of Japan acts on behalf of the Ministry of Finance in currency intervention.

Japan is not the only developed economy to have intervened to weaken its currency in the past year.

 


 

And amusingly, here is what BofA had to say on the topic of the USDYEN and intervention in the hours just before the BOJ threw in the towel. In a nutshell, BofA see USDJPY below 80 by year end even with FX intervention, when factoring in QE2. Oh yes, and note on Chart 13 how BOJ interventions have failed pretty much every single time.