MUFG Research discusses the scope of the JPY intervention and argues that the elevated intervention fears could well fade quickly. MUFG maintains a long USD/JPY targeting a move towards 146.
"The yen was the clear outperformer in the FX markets yesterday with those gains only partially reversed so far today after the comments yesterday from Finance Minister Shunichi Suzuki and reports that the BoJ was checking rates had the desired impact...The steps were in reality the last efforts to halt JPY depreciation before actual intervention. So in that sense the market reaction is understandable. But it is also highly likely that there is still a deep reluctance on the part of the authorities to intervene," MUFG notes.
"However, equally we shouldn’t simply dismiss what happened yesterday. If there is intervention in the coming days or weeks it will be conducted under the guise of what is allowed under the parameters of the G20. That means the speed of a move is important. In June when the MoF/BoJ/FSA released a joint statement expressing concern over JPY depreciation (10th June), USD/JPY had advanced 5.5% in the previous 10-day period. Over a 13-day period to yesterday, USD/JPY advanced 6.0%. If we consolidate and then slowly move higher, the chances are that the MoF will accept the move and refrain from intervening," MUFG adds
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