Japanese stock markets have crashed 15% (the "most since Lehman") and USDJPY plunging (most since 1998) since Kuroda unleashed NIRP and are down 11% since QQE2 was unveiled to save the world from an absent Fed. So with NIRP and QE (and jawboning) now 'useless' for Japanese monetary policy, there is only one option left - Yentervention.
Suddenly it all stopped working..
As Central Banker faith falters...
Overnight saw some hints at this beginning to happen, as Bloomberg reports,
The BOJ made “rate-check” calls to some banks with implicit questions on whether they planned to buy more yen, Sassan Ghahramani, head of SGH Macro Advisors, wrote in a note Thursday. Checking rates is sometimes intended to send a signal to markets that intervention may be on the way.
Aso declined to comment Friday on whether authorities have already intervened.
Japan hadn’t bought or sold currency to sway the yen’s price since a record intervention in 2011 helped stop its advance after reaching a post-World War II record.
Japan has spent the equivalent of between $8b and $117b in the past four episodes to check undue strength in the yen. The currency gained between 2% and 9% in the three months before interventions; the yen has strengthened 9.1% in the past 90 days. The BOJ has typically come into the market around 9-11am Tokyo time.
Oct. 31-Nov. 4, 2011Yen strengthened to an all-time high of 75.35 on the first day of interventionThen Finance Minister Jun Azumi said on Oct. 31 he ordered intervention at 10:25am Tokyo time, saying “speculative moves” of the currency failed to reflect Japan’s fundamentalsMOF sold 9.09t yen to buy $116.3bYen had risen 4.5% in the three months through Sept. 30; it weakened 3.1% through the intervention and gained 0.8% through the remainder of November
Aug. 4, 2011MOF sold 4.51t yen to buy $57.2bYen rose to 76.30 per dollar on Aug. 1, the strongest since a previous recordThree days later, Japan intervened; then Finance Minister Yoshihiko Noda confirmed intervention at around 10am Tokyo time, saying decisive action was needed against speculative and disorderly currency movesYen had climbed 5.8% in the three months through end of July; it fell 2.3% on Aug. 4 and strengthened 2.9% in the remainder of August
March 18, 2011MOF sold 692.5b yen to buy $8.6bYen soared to 76.25 per dollar on March 17, what was then a record, in the aftermath of a magnitude 9 earthquake that struck Japan six days earlierNoda confirmed that intervention was conducted at 9am Tokyo timeOther G-7 members also sold yen in joint intervention, saying the step was in response to recent movements in yen associated with tragic events in Japan, and at the request of Japanese authorities
The current surge in Yen is the largest since 1998 and suggests intervention may be overdue...
“The yen is all about risk-uncertainty, which could encourage Japanese investors to pull out of overseas assets and retreat to the safety of home,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce. “Of late, it’s been a case of capital preservation rather than return. The authorities have been making plenty of noises about this unwanted strength and I see 110 as a potential line in the sand for intervention.”
The only problem is - the last 3 mini Yenterventions failed miserably to spike USDJPY...
And traders doubt The BoJ's ability...
“The stronger rhetoric and speculation about intervention or further monetary policy easing will likely create some volatility in the near term, but there’s going to be a lot of interest in selling the dollar if it goes back up against the yen,” Barclays’s Shinichiro Kadota, a foreign-exchange strategist in Tokyo, said by phone. “The market’s questioning the impact of and scope for further easing.”
Which is very clear from the size of bets on a stronger Yen...
“For intervention to turn around dollar-yen permanently, the BOJ would also need to ease domestic monetary policy further and -- more importantly -- the Fed to raise rates,” Mohi-uddin said. “Until the Fed is able or willing to raise rates further this year, dollar-yen is likely to trend lower, punctuated by any intervention Tokyo undertakes.”