Quick Comment on FX Markets Post-BOJ & Potential Yentervention
For the sake of live market time sensitivity, this is a mid-article-writing quick commentary release on JPY’s sudden and sharp intraday rally immediately following BOJ earlier today.
BOJ Rate Policy: No change, in line with expectations
15:30 - BOJ Gov Ueda Press Conference starts with USDJPY at 158.60, during which Ueda gives as much information and substance as the content of the policy statement itself does - which is nothing.
Whether Ueda himself realizes this or not - a “no comment” stance is not market-neutral when you are looked at by market participants to be the last line of policy defense that would-be (or soon-to-be) sellers are awaiting. So, despite critical market impacting matters, such as PM Takaichi dissolving parliament, JGB long-end blow up and JPY further weaker since last meeting BOJ rate hike, Ueda doesn’t provide anything (as always). USDJPY moves into 159 hands.
16:30 - BOJ Gov Ueda’s press conference ends.
USDJPY suddenly plunges -2 big figures from 159.30 → 157.30, then rebound and “stabilize” half the move → 158.30.
Is/was this official MOF yentervention?
Likely not in my view. Here is my Note posted earlier:
Despite amount of commentary I’ve made on yentevention topic I’ve only ever made an actual call on imminent coming yentervention just once:
4/27/24
BOJ day, as JPY↓ & JGB↓
Gov Ueda firmly/strangely dismissed JPY↓ concern
Made me wonder if he knew something
& I was correct
👇
The next trading day was Mon 4/29/24, a 🇯🇵market holiday (FX markets don’t have national holiday closes) - around 🇯🇵noon,
USDJPY breaks into 160 handle (from 155 handle at open on the aforementioned Fri)
USDJPY 160 lasted for ~20 mins as it was suddenly & sharply crushed via yentervention 1 of 2 for that week.
2nd round of USD slamming yentervention came on Wed May 2, few mins after FOMC press conf (~5AM 🇯🇵)
By end of that week of yenteventions USDJPY 160 → 151
But the initial set up & the reason for my one and only prediction of imminent yentervention “tell” was - BOJ gov Ueda, who is genuinely horrible at “acting” (smoothly/naturally & convincingly projecting a message as a public figure), doing this act of:
“JPY getting crushed as of late? Why, what ever do you all mean? 😃😅”press conf that then itself got JPY further crushed & bewildered us all
As it relates to today/current-
It’s actually a remarkably similar setup:
•USDJPY high 150s
•JGB yields surging to (at that moment’s) new highs
•BOJ hiked rates at prior meeting, now on hold (despite “if outlook met → BOJ continue to hike” & outlook met)
•Ueda “dismissive” (no comment) on JPY weakness (although not to same extent as Apr24 BOJ press conf)
Currently, I am now not calling for imminent yentervention - my yentevention outlook remains as is:
🇯🇵MOF Katayama cannot blast tens of billions in USD at the market without clear permission from (if not cooperation with) 🇺🇸Bessent, & Bessent’s clearly repeated public view is that JPY is weak because of BOJ’s ridiculously low rates, & he therefore URGES BOJ to hike them. So MOF can’t directly act in fx markets as long as BOJ isnt getting rates towards those of normal countries (not sub-1% still)
I mention all this because just now, right after Ueda’s press conf, USDJPY took a very sudden sharp leg lower. I don’t think this is official yentevention, I think it’s market actors who recognize the aforementioned similarities.
See: April '24 BOJ: "JPY Not a Significant Factor" → Imminent Yentervention Possible
Currently the commentary out of MOF is one of not confirming nor denying this was yentervention.
As I said, I’m currently working on a broader piece on PM Takaichi announcing of (and actually enacted today) her dissolving of the Lower House for snap elections to be held Feb 8th, and the market consequences. And for once, I don’t have to underscore how significant to market interests this is - GLOBALLY AND ACROSS ASSET CLASSES.
From another Note earlier:
So my key 2 themes from the past year hit public attention this week:
1. JGBs = 🌎most dangerous market
2. Market relevance: BOJ → MOF
USDJPY→160
Obviously that was written before this fake yentervention, and no, I don’t retract that last line.
Point is that I don’t research, analyze and publish random shit to try and force-shove “Japan relevance” into existence.
I do this because the outsized influence that Japan (policy, politics, domestic and foreign capital behavior) has on markets not only exists, but nobody else is discussing it.
Below are (some of) the articles to revisit on the two key themes of “JGBs are the world’s most dangerous market” and “BOJ out - MOF in (Japan politics and fiscal authorities matter more than BOJ). And note that it’s not that these are now coming to fruition - they’ve already been, it’s just that it’s now arriving in public consciousness and dialogue.
PM Takaichi and the World’s Most Dangerous Front-End
https://westonnakamura.substack.com/p/pm-takaichi-and-the-worlds-most-dangerous
World's Most Dangerous Market: JGBs
https://westonnakamura.substack.com/p/worlds-most-dangerous-market-jgbs
https://westonnakamura.substack.com/p/jgb-vigilantes
Major Overlooked Risk To Global Bond Markets: Japan Upper House Elections
https://westonnakamura.substack.com/p/major-overlooked-risk-to-global-bond
Stay tuned - Japan hitting markets is about to turn up a few more notches.
Weston