Coordinated Intervention To Weaken the Yen?

The Bank of Japan announced an immediate emergency meeting to begin very soon – Monday 00:00 GMT. There are expectations for new easing steps to boost the economy. But there might be more – Will we see a global coordinated intervention to weaken the yen? Yen crosses are already on the rise.

The governor of the BOJ, Masaaki Shirakawa,  shortened his visit in Jackson Hole, where he met other central bankers, and returned swiftly to Japan. At 00:00 GMT, or 9:00 Japanese time, the BOJ is meeting for an emergency meeting. It happens as the week begins in Japan, and very early for JPY crosses in other places in the world:

Update: The BOJ disappointed by taking very limited measures. The yen strengthens after rising. But, there are still expectations for an intervention to weaken the currency, with 84.00 marked as the final frontier.

The rather new Japanese government is showing growing vocal concern about the strength of the yen. USD/JPY recently reached fresh 15 year lows. This hurts the Japanese economy, that is based on exports.

The Japanese government, led by Naoto Kan, pushed the BOJ to take measures, and did it in  a public manner. It is also expected to declare a new stimulus program of its own, in a meeting on Tuesday.

But the BOJ doesn’t wait for Tuesday. According to expectations, the bank might enlarge its existing lending encouraging plan:

The central bank may expand a three-month 0.1 percent loan facility, increasing the supply of funds from 20 trillion yen ($230 billion) or extend the duration of loans to six months, Dow Jones reported.

Coordinated Intervention?

But there might be more under the hood. There’s talk  that the BOJ will intervene directly in the markets to weaken the yen. As we know from various examples, central bank interventions are short-lived. The Swiss National Bank lost a lot of money on its interventions.

The meeting of many central bankers from all over the world in the Jackson Hole Symposium raises the question of a coordinated effort to weaken the yen. Together with central banks in the US and Europe, a move to weaken the yen might be successful.

Similar coordinated moves in the past had significant success. The US might support this move also as a  maneuver against China, which keeps it’s currency, the yuan, weak, angering the US.

In the meantime, the Japanese yen weakens on thin trading. USD/JPY rose to 85.70, GBP/JPY rose above 133, EUR/JPY touched 109.25 and CHF/JPY reached 83.40.

This is a very early hour in the week – only the Sydney session is open at the time of writing. The Tokyo session will open soon. Later, there’s a bank holiday in Britain.

Thin trading is a good timing for an intervention.

The BOJ will hold a press conference at 5:30 GMT, and we’ll get to know what’s going on. An announcement of further easing steps is likey to weaken the yen only marginally. A coordinated intervention will send all JPY crosses to the skies.

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