(Chart from RBC Capital Markets.)
Maybe we should have sent this earlier. Sorry BoJ.
Anyway, the last two pushes by the BoJ, in April and February, didn’t have much of a lasting impact — although February’s move when the bank also announced an explicit inflation target was initially very impressive. Essentially, the BoJ is and was fighting to stem a tide rather than reverse its flow.
That said, the BoJ’s stimulus may signal another important move for the yen as it’s the Ministry of Finance in Japan which gets to actually intervene in the FX markets. From Citi’s Osamu Takashima:
From the view point of the MoF’s intervention policy, the today’s decision by the BoJ would also have an importance. In the past two years, the MoF implemented JPY selling interventions four times. All of the recent four interventions were necessarily decided after the BoJ’s easing. Therefore, one of the essential conditions for the next intervention was satisfied by the today’s decision by the BoJ. Of course, if JPY remains weak the MoF need not act, but should the market sentiment become risk averse and JPY starts to appreciate again, the market will focus the possibility of the MoF’s intervention. In such case, the fact that the BoJ decided to ease today should have a significant meaning.
Although, as Izzy points out this round of asset purchases may have more to do with plugging up a coming hole in government spending than anything else.
Currency wars redux – FT Alphaville
Yen’s strength matters most to markets – FT Short View
Dear Bank of Japan: So you tried the easing thing a gazillion times… FT Alphaville