MOF data has confirmed the size of huge Oct 31 intervention at Y8.072trn and also highlighted that the MOF ordered the BoJ to conduct stealth intervention for a further four days totalling another Y1 trn.  The tone of the MOF has held largely unaltered since then with Finance Minister Azumi confirming overnight that he would not rule out any measures to protect Japan’s national interests from speculative distortions in the market. 

However, the Oct/Nov interventions were unusual in so far as they were unilateral and counter to the normal G7 mantra that market should set the level of FX rates.  Japan did come under some criticism from the US towards the end of last year when the latter recommended that Japan should concentrate on stimulating its economy rather than intervening. 

Fear of the wrath of the US and other G7 partner could potentially stay the hand of the MOF going forward into 2012.  That said with the enormous liquidity adds by the BoJ failing to provide much stimulus to the economy and with the fiscal position becoming increasingly uncomfortable the MOF are likely to hold the threat of intervention over the market for the foreseeable future.  We would continue to view any flurries to the USD/JPY76.00 area as buying opportunities.


source: Rabobank