According to Reuters Japan has continued to intervene in the fx market since it pushed usdjpy up on October 31st. If this is correct it marks a change in tactic in fx intervention for Japan which in recent years use a more direct approach of earlier warnings followed by a press statement after the fact. Trading evidence provided by Reuters showed that Japan most likely continued to intervene using a stealth approach using small amounts to curb the fall of usdjpy. By law, the govt does not have the right to print cash directly and it must fund intervention by issuing financial bills, usually Fbs of 3 months. The Ministry of Finance sets the intervention cap and the Bank of Japan, which is legally independent, prints the cash and conducts the operations.
Unless the govt increases the intervention cap, which it recently did with a supplementary budget, the BOJ still has roughly 38 trillion yen of ammunition of the 165 trillion legal cap. To put things in perspective, the BOJ total intervention amount from 2003 to 2004 when it intervened in the markets was 35 trillion.
Other than debating another supplementary budget in a split parliament to increase the cap, the govt can sell foreign assets to the BOJ and use the proceeds to fund further intervention. It is estimated that this could provide an easy additional 10 trillion plus:
It is too early to call Japan's fx intervention ammo spent.
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HappyTradersFx
www.happytradersfx.net
