Column-Japan's FX intervention bark will lack bite: McGeever
By Jamie McGeever
ORLANDO, Florida (Reuters) — The yen's slide below 150 per dollar has fired up warnings from Japanese officials that the pace of depreciation is «excessive» and «undesirable,» but a repeat of the yen-buying intervention frenzy of 2022 seems unlikely.
Tokyo may not intervene at all.
Its tolerance for a weaker exchange rate may be greater now than it was then, lower yen volatility points to a pretty relaxed FX market, and U.S.-Japanese yield spreads are probably more likely to narrow than widen from here.
In Japan, inflation has peaked and is now falling, pipeline price pressures have cooled significantly, the economy is in recession, and the country's terms of trade have improved from 2022.
What's more, the Bank of Japan still appears to be on track to end negative interest rates soon, so a «natural» turn in the yen is a distinct possibility.
Globally, while there may be increasing uncertainty around the timing and extent of the next interest rate moves by the Federal Reserve, European Central Bank and Bank of England, they will almost certainly be lower.
None of that points to as pressing a need for policymakers in Japan to wade into the market spending tens of billions of dollars to prevent the yen from making new historic lows through 152 per dollar.
NO HURRY
To be sure, they may want to prevent the yen's slide from spiraling into a more damaging selloff that threatens the functioning of Japanese financial markets. It is already down a hefty 6% against the dollar this year.
But a re-run of September and October 2022 when Japanese authorities bought yen in the FX market for the first time since 1998, and in record quantities, is a remote prospect.
Annual consumer inflation at that time was above 3%
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