JPY: Verbal Intervention Continues, Ahead of G7 Meetings - Nomura
JPY: Verbal Intervention Continues, Ahead of G7 Meetings - Nomura
Yujiro Goto, Research Analyst at Nomura, notes that the USD/JPY has been
recovering after breaching 106 last Tuesday, without clear catalysts.
Key Quotes
“JPY
long positions remain large, while USD positioning at the IMM has
already turned to net short positions against major currencies, likely
causing position unwinding of JPY long positions accumulated after the
BOJ’s disappointment.
In addition, since last week comments on the FX market by Japanese policymakers have been frequent.
Finance Minister Aso today repeated that Japan can intervene to
stabilise currencies if necessary, after stating it is natural that
Japan has the means to intervene yesterday.
Prime
Minister Abe also commented on FX markets last week during his Europe
visit, repeating that "abrupt currency moves are not desirable".
He also said "exchange rates must be stabilised" and he said he may
discuss FX markets at the G7 summit meeting if necessary. The head of
Keidanren, Japan’s biggest business lobby, Mr. Sakakibara, yesterday
said it is reasonable for Japan to intervene in the market amid rapid
and speculative appreciation, while the lobby would support JPY
intervention if it occurs. As the upper house election approaches,
avoiding further JPY appreciation will now likely be a higher priority
for the government.
Finance Minister Aso and Prime
Minister Abe's comments still do not suggest imminent intervention at
current levels, especially after the recovery of USD/JPY this week.
Nevertheless, FX intervention concerns will likely limit downside risks
of USD/JPY for the time being. Two meetings, the G7 Finance Ministers
and Central Bank Governors’ meeting on 20-21 May and G7 summit meeting
on 26-27 May, will be important for judging the efficacy of verbal
intervention as views on the FX market between US and Japan appear to be
different.
Any convergence or further divergence between the US
and Japan’s view on the FX market will be worth monitoring. We believe
the expected announcement on a fiscal stimulus package by Japan after
the G7 summit could alleviate criticism on Japan’s FX intervention when
necessary, while monetary policy easing is also likely to follow after
any FX intervention, as happened in 2010-11.”
