Japan intervenes to push down Yen

Post #332,584 by jay 9/15/10 9:21:29 AM Reply	Japan intervenes to push down Yen http://news.yahoo.co...nomy_intervention Japan sold yen in the market on Wednesday for the first time in six years and promised more to come in a bid to stop the currency's relentless rise from hurting exporters and threatening a fragile economic recovery. Even as the U.S. dollar surged as much as 3 percent on the day against the yen, doubts lingered about the ultimate effectiveness of Japan's unilateral yen selling spree. A 15-month solo effort by Switzerland to weaken its currency did little to tame the Swiss franc. In addition, Japan is trying to put a halt to yen strength while other major central banks such as the Federal Reserve may be considering additional steps to ease policy that could weigh on their respective currencies. This could be a very significant event, or it could amount to nothing. It is probably only the first of several such sales as Japan tries to keep the Yen from rising too high. There is a lot of question though about Japan's actual ability to keep the Yen down, particularly as other countries are looking at policies to keep their currencies low also. Everybody wants to export their way out of their economic problems. Japan is also doing this in an unusual way. Normally when a country does this they issue bonds or otherwise takes steps to keep the sudden increase in the number of bills in circulation from causing inflation. Japan isn't doing that here, their local economy has been deflationary for so long that they want to spark some inflation. Jay
Post #332,637 by Another Scott 9/15/10 9:54:20 PM Reply	Felix's take. http://blogs.reuters...ht-actually-work/ Has a central bank ever intervened successfully in the foreign exchange market when the momentum trade was against it? The yen has been rising alarmingly of late, and now the Bank of Japan is trying to push it down. At first glance, the action looks like a something-must-be-done-this-is-something -therefore-this-must-be-done move: a new prime minister and a Âbold actionÂ doomed to be proved ineffectual. The FX markets are so enormous (dollar/yen alone trades some $750 billion per day) that itÂs hard to believe a single sale of less than $20 billion in yen could even have the short-term effect we saw last night, let alone have any lasting consequences. But this isnÂt just about FX-market intervention. This is also about monetary policy, and that could make a real difference: [...] Check the comments, too. It's not clear that it's going to work... Cheers, Scott.
Post #332,640 by jay 9/15/10 11:07:04 PM Reply	Monetary intervention has always had a low success rate Monetary intervention has failed more often then it worked. Countries attempting it are usually acting too late and trying to fight fundamental market forces. Japan is probably in better situation then most countries trying it though. Particularly if they leave it unsterilized. This reduces the cost to the government to nearly nothing, so they can do a lot more intervention. Japan can do this because they are not worried about inflation right now, some positive inflation would actually help them right now. Jay

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