Intervention’s not what it used to be. Back in December 2008, Shoichi Nakagawa, then Japanese finance minister, succeeded in talking down the yen briefly by evoking the threat of heavy duty selling by the central bank. This kind of verbal intervention was only just credible, a year after the Group of Seven industrialised nations first registered its disapproval of exchange rate manipulation in its communiqué. But then, it was a tough time for everybody.
Now that the total collapse of the world economy seems to have been averted, Japan’s revolving carousel of finance ministers no longer bothers going through the motions. So strong is the Group of 20’s faith in market-determined exchange rates that investors largely discount the possibility that a founder member of the Group of Six would be allowed to repeat its actions of early 2004, when the Bank of Japan sold a record ￥14,831bn ($171bn) over 47 days. Last November, noting that the yen was at its highest since July 1995, Naoto Kan, then finance minister, remarked forlornly that “it would be good for the yen to weaken a little more”. And in recent weeks, with the yen testing those nominal levels again, there’s so far been silence from Yoshihiko Noda, the ninth incumbent within the past four years.
More thinking aloud is a possibility, especially if Japan’s overseas shipments slow for a fourth month in June. But it won’t imply any action, because it can’t. Just look at the plaudits dished out last month to China, after swapping a peg for a basket (a lot of noise, incidentally, for a 71 basis point appreciation against the dollar since then). Should the yen keep soaring to ￥75/$1 or higher, co-ordinated action may well be discussed sotto voce by the G8. But for now, as traders position for a prolonged endaka, or period of yen strength, exporters should suck it up.