Forex Flash: What happened to the yen? – Westpac

According to the Westpac Strategy Team, “We have maintained a highly skeptical view towards the recent plunge in the value of the yen. It is not the fact that the BoJ has finally shown much greater policy flexibility that is our issue here.” Recent monetary policy developments in Japan, forced or not, have been quite rightly applauded by financial markets. Rather, it is the fact that the BoJ has simply not done enough, and is arguably not currently intending in doing enough to validate the moves in our view.

Overall, “We have tended to view developments at the BoJ as ‘too much talk and not enough action’. To be sure, we have been treated to some very significant monetary policy developments including recent ‘back to back’ increases in QE and a new ‘price stability target’. We have also been treated to a barrage of comments from various Japanese officials with some suggesting that a dollar/yen level of 100 would not be a concern.” the team adds. However, the BoJ has simply refused to embrace Fed style long dated security purchases. To compensate for this shortfall in BoJ action, verbal intervention has been a critical part of the sharp yen depreciation.