Around this time last year we wrote here on currency intervention in the Japanese Yen. The TL;DR version.

There is a pretty simple reason we don’t see intervention much anymore – it does not work…Intervention is like trying to hold 100 ping pong balls underwater at the same time – sooner or later one will pop up. As long as the BOJ keeps interest rates artificially low and continues yield curve control, the currency will eventually, intervention or not, get blasted. When the Fed is guiding market yields close to 5% and even the Europeans are raising 75bps a meeting, the policy gaps are untenable. Something has to give.

We are back where we started, and that’s with the Bank of Japan taking further actions widening the yield curve control band first in December 2022 and then again in July 2023. 10 year JGB yields have moved from 25bps to 75bps. This seems like another critical juncture.

Do we see more intervention here again at 150? More yield curve policy changes? Do they let the currency weaken further? Or do they hope that we have just seen the peak in US yields that fall from here, bailing them out?