USD/JPY: downside limited by speculation about further BoJ easing - Commerzbank

BoJ verbal intervention is not having an impact on JPY, as the government has often threatened that it would intervene against a strong JPY but has never done so, said Esther Reichelt, analyst at Commerzbank, who added that only speculation about further monetary policy measures in September is preventing a much faster appreciation of JPY.

Key quotes

“The latest USD weakness is most inconvenient for the Bank of Japan (BoJ), as USD/JPY has consequently fallen towards the 100 mark again. Verbal intervention is now being heard again from within the Japanese government.”

“Deputy finance minister Masatsugu Asakawa described the latest downward movement in USD/JPY as a “one-sided speculative” movement and thus signals that the government is ready to intervene on the FX market. As the government has often threatened since the beginning of the year that it would intervene against a strong JPY but has never done so, comments of this type are no longer having an impact on JPY exchange rates.”

“Only speculation about further monetary policy measures by the BoJ at its next meeting in September is preventing a much faster appreciation of JPY. The BoJ wants to assess its current measures (asset purchase programme and negative interest rates) very carefully before the September meeting and possibly review how it can achieve its inflation target as quickly as possible.”