April '24 BOJ: "JPY Not a Significant Factor" → Imminent Yentervention Possible
Does Governor Ueda have knowledge of an imminent yentervention, thereby explaining BOJ's strangely relaxed stance on JPY getting crushed?
(This is being written on the evening of Fri April 26 Japan time for context/reference - just in case JPY volatility has already exploded by the time you read this)
▷ MOF’s biggest fear and risk is a failed yentervention, as JPY would be truly destroyed, and this is what is keeping yentervention from taking place
▷ Why is BOJ/Ueda being so casually flippant about JPY? Because they have MOF’s assurance
▷ BOJ must mind sharply rising JGB yields, and MOF must mind sharply rising USDJPY
▷ On JPY Futures and Options, and fake yenterventions
▷ What Could Happen if Yentervention Fails
I believe there is risk of an imminent Ministry of Finance yentervention in the spot market - as in potentially over the next week (where Japan is off for Golden Week), if not at some point during the US trading session today, depending on how JPY trades.
I still maintain my theoretical USDJPY 158 target for yentervention, but that was what I had theorized on April 15th, and obviously that has to flexibly adapt to prevailing market conditions (though, with USDJPY currently knocking on 157’s door, my price target and time frame of “158 on BOJ day” from my April 16th note Yentervention #3 - excerpt below)
…it seems at this rate, USDJPY 158 will be reached not only within this month, but seems to land right on April BOJ day. And so that also sets up against precedence of yentervening on BOJ day post press conference.
https://westonnakamura.substack.com/i/143558572/yentervention
Here is what I forgot to add to my note from yesterday about a potential BOJ shock rate hike possible, due to BOJ taking on a “currency mandate” - and why Ministry of Finance (who is the body that is “supposed to” yentervene) is frozen.
The absolute worst thing that can happen to JPY is if there is an official, state-executed Ministry of Finance yentervention - and it fails.
By “fails” - I mean tens to hundreds of billions of USD sold in the spot market, and USDJPY plummets, but then subsequently recovers in short order (within minutes ~ a couple of days).
If that should happen, then it would reveal to everyone that the single most direct tool available to combat JPY downside - the act of stepping into markets and directly buying JPY / selling USD - is not effective.
And if that realization sweeps across markets, JPY will be destroyed, and instantly so. (More on this in section below.)
I am of the belief that the Ministry of Finance is terrified of a failed yentervention - and that the MOF views the risk of a failed yentervention to be greater than a slow-death JPY occurring as we speak. And as long as that weighting of risk exists AS MINISTRY OF FINANCE PERCEIVES IT (and not what I / we believe will/won’t happen in markets) - yentervention will continue to not be used, and only verbal jawboning, and symbolic (until not) measures such as the US-Japan-South Korea trilateral joint statement from G20 Washington last week will be used (and used to its full extent).
This is why I had been thinking that BOJ might sneak a shock rate hike at today’s policy meeting. They not only did not do any such thing - they stayed completely unchanged from March. Quite literally - the official monetary policy statement is an extremely short, empty “ditto, March”
Its not just BOJ, its Governor Ueda’s behavior and conduct at the press conference- who is taking a very strange apathetic attitude about a +5% multi-decade breakout in USDJPY since the last BOJ meeting only a month earlier, despite the common narrative that the March BOJ itself had kicked off the relentless JPY decline - (inaccurate as that may be).
“Recent depreciation in the yen has not had significant impact”
-Governor Ueda Press Conference
That quote is everywhere right now in Japan. And it’s not a one-off comment- basically every question throughout the entire press conference was yen, yen, yen. Governor Ueda had maintained this “not a big deal/factor” stance. This is why USDJPY at the start of the press conference was at 155.90, and hit 156.72 during.
Why is BOJ / Ueda being so nonchalant about the yen?
They didn't shock hike rates as I had suggested, that’s fine/normal to not do that. But not hint hawkish if policy is unchanged? Why go out of your way to be “toned down?”
Could be any number of reasons, including (but not limited to):
Bank of Japan / central banks do not oversee currency- currency is under the Ministry of Finance
Gov Ueda does not want to be seen as minding the currency, more so than minding the currency, such that he’ll go out of his way to show it
Gov Ueda genuinely does believe (and may even be correct about) recent JPY weakness is of little significance at this moment
OR...
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