Stever Barrow, head of G-10 strategy at Standard Bank, says the Bank of Japan could step in to sell; USD/JPY from Friday.
He thinks the Bank of Japan could discuss intervention at its meeting on Friday Japan time. An intervention could then follow during U.S. business hours, or shortly thereafter.
Barrow highlighted the similarities between the setup adopted ahead of this week’s BoJ meeting and the central bank’s previous intervention in late 2022, saying the BoJ got rid of around $20 billion in assets denominated in US dollars on September 22, 2022, when his last intervention began.
- the previous intervention took place immediately after a BoJ meeting
- was preceded by meetings between Japanese Finance Ministry officials and their G-7 counterparts
Similar meetings have taken place recently, including a meeting between G7 finance ministers last week, as well as a meeting between Japanese and Korean officials with Treasury Secretary Janet Yellen.
Information comes via Dow Jones/Market Watch (gated)
–
If you are curious about the intervention mechanisms and why you should monitor the Ministry of Finance:
- The Ministry of Finance (MOF) of Japan is responsible for formulating the country’s foreign exchange policy, while the Bank of Japan (BOJ) is responsible for executing these policies, particularly in terms of foreign exchange intervention. exchange.
- The MOF can decide to intervene in the foreign exchange market if it considers (in the current situation) that the yen is too weak. Once the MOF decides to intervene, it issues instructions to the BOJ. The BOJ then conducts operations in the foreign exchange market by purchasing (under current circumstances) yen. The special account of the Foreign Exchange Fund (FEFSA), which falls under the jurisdiction of the MOF, is used for interventions. You will notice that in the current situation, where the BOJ would buy yen, it would draw on US dollar reserves to finance the other side of the transaction, buying US dollars (or other currencies if necessary).
- The BOJ’s operations are generally conducted through commercial banks that trade in the foreign exchange market. These may be spot transactions or futures transactions that are expected to take place at a later date. It should be noted that while the Finance Ministry has the ultimate authority to decide when to intervene, it does so in close consultation with the BOJ. The BOJ provides expertise and advice on currency and financial market conditions, which may influence the MOF’s decision. This collaboration reflects the balance between the roles of the two entities: the MOF as the government’s main financial and economic advisor, and the BOJ as the country’s central bank that maintains the stability of the financial system.
I posted earlier today:
cnbctv18-forexlive
