JPY: primed for intervention, if needed

USD/JPY has pushed as high as 147 without the MoF telling the BoJ to intervene
to support the JPY. We continue to think the MoF is taking a sniper approach with
its intervention and will not waste its bullets ahead of the US inflation data.
Importantly, since arriving in Washington for the G20 meeting of finance ministers
and central bankers, Japan’s Finance Minister, Shun’ichi Suzuki, has reemphasized
the MoF is not focusing on levels in FX, but instead on volatility. And,
that there is no particular FX level that would trigger intervention. He also continued
to warn of “bold action if necessary” and that appropriate action would be taken
against “excessive FX moves”. There are a few factors at play here. First, Suzuki
is emphasizing to the market as well to his US hosts that Japan is focused on
reducing FX volatility rather than any particular level of the JPY. This rhetoric is
aligned with the G20 communique on FX. Second, Suzuki is also cautioning the
market if US inflation data were to surprise to the upside, it is not a free license to
push USD/JPY higher similar to what happened post the BoJ meeting and
Governor Haruhiko Kuroda’s press conference on 22 September. And third,
excessive FX moves have been previously defined by BoJ Governor Kuroda as 2-
3 Yen per day, so a rush higher in USD/JPY towards 149 would meet that
benchmark. So we think the MoF is primed to intervene to support the JPY post
the US CPI data if the need arises and this need would be a large 2-3 Yen move
higher in USD/JPY.

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