With the Yen soaring (and USDJPY plunging) some 10% in 2016, in the process crushing the tightly correlated Nikkei and leading to such outcomes as the largest Asian clothes retailer slashing profits by a third in just 4 months due to the strong currency, everyone has been wondering i) why is the BOJ waiting to intervene when it had no problems unleashing NIRP when the USDJPY was about 1000 pips higher and ii) when will it intervene again?
According to a poll by Bloomberg, Japanese authorities may intervene in the currency market if USD/JPY falls below 100 based on the median estimate of 14 analysts compiled by Bloomberg News.
Estimates range from 95 to 110.
As we reported earlier, the USDJPY hit a 17-month low - the lowest since BOJ's QE expansion in Oct. 2014) before rebounding 0.5% today to 108.73 on warnings from Japanese Finance Minister Aso that abrupt yen movements are most undesirable.
Additionally, Japan Chief Cabinet Secretary Suga warned several times this week that the authorities are closely watching the FX mkt and will act appropriately if necessary as there have been one-sided moves in FX mkts.
Curiously, LDP lawmakers, who form the ruling party, are less eager for intervention Bloomberg writes. LDP policy chief Tomomi Inada said today now isn’t the time for FX intervention, echoing Keiichiro Tachibana earlier this week. Begs the question if the G-20 "Shanghai Accord" was mostly coordinated and precleared with political figure, and not so much with central banks?
In any event, an intervention by the BOJ is indeed just a matter of time, the only question is at what level in the USDJPY and how long before the determined shorts push the Yen as high as it will need for Kuroda to demand mercy.
Here are some analyst views:
"At the moment, there is no international support for intervention anywhere near current levels, particularly considering the yen is actually historically quite weak here,” says Ray Attrill, global co-head of FX strategy at National Australia Bank
Decline in USD/JPY below 100 "would mark the confirmation that psychology around the currency has completely changed," says Gareth Berry, an FX strategist at Macquarie Bank.
"Chance for intervention at this level is quite low," says Sim Moh Siong, an FX strategist at Bank of Singapore; cites G-7 meeting next month (the meeeting will take place May 26-27)
Here is a summary of what Wall Street thinks is the USDJPY level at which Kuroda will intervene
- Bank of Singapore: 100
- BofAML: 105
- CBA: 100
- Daiwa Securities: 100
- JPMorgan: 95
- Julius Baer: 100-105
- Macquarie: 100
- Mitsubishi UFJ Morgan Stanley: 99
- NAB: 100
- Nomura: 105
- RBS: 105-110
- Societe Generale: 104
- Swissquote Bank: 100
- Westpac: 106.5