Analysts at HSBC note the dollar is not in the ‘bubble-like state’ of late 2022, so the risk is any action now would yield “very limited success.”
Analysts at Morgan Stanley say there is little incentive to intervene from a fundamental perspective – Japan’s terms of trade have improved, the weak exchange rate has hugely boosted exporter revenues and rate differentials are still heavily against the yen.
Joseph Wang, a former senior trader at the New York Fed, was more blunt: “Time for the authorities to put up or shut up. But honestly, my guess is intervention would be a waste and just buy a little time,” he tweeted on Wednesday.
Japan’s officials may not fully welcome the yen’s weakness, but equity investors do. The Nikkei is on the brink of new highs, up nearly 22% so far this year and on track for its best quarter since Q2 2009.
Another 1.5% to the upside by the end of the week will seal the index’s best quarterly performance on record.
