Though it is not frequently mentioned, market participants know that there is a constant threat of intervention working against the Japanese yen. It has been the policy of the previous administration (in power for nearly half a century) to protect export interests by strategically intervening on the currency’s behalf to ensure that it does not appreciate so far as to choke off demand.
However, with the regime change, there seem to have been a few alterations to the government’s economic approach as well. Today, Japan’s new Finance Minister, Hirohisa Fujii, said at a press conference that he was opposed to intervention if the yen was appreciating steadily and “speculative funds” were not eliciting “abnormal movements.” Taking a far more Laissez-faire approach to the often manipulated exchange rate, the policy authority said it wasn’t appropriate for the government to decide what an appropriate level for the currency was. It will be interesting to see how this extra degree of freedom will impact price action going forward. In other news, the Bank of Japan surprised no one in leaving its benchmark lending rate unchanged at 0.1 percent. Keeping with the measured improvements in the outlook over the past few months, the group said there were signs of improvement but ‘downside risks’ as well. We will see if the upcoming monthly report elaborates on any measured improvement in their language.