In a recent news article, it is reported that Suzuki, a policy-making board member of the Bank of Japan, has made a verbal intervention attempt regarding foreign exchange (FX) moves. He stated that there should not be a fixed “defence line” in dealing with these movements and that the bank will not rule out any steps to respond to disorderly FX moves. Suzuki emphasized that they are closely monitoring FX moves with a high sense of urgency. However, his comments do not seem to have a strong impact on the traders.
Suzuki’s reference to a “defence line” implies a level for USD/JPY exchange rate that could trigger intervention by the Bank of Japan. However, it is difficult for Suzuki to specify a firm level, as traders could quickly test his resolve by pushing the rate to that level. If intervention occurs, the dip in the exchange rate may be temporary and will likely be followed by another attempt to test the bank’s determination. On the other hand, if Suzuki chooses not to intervene, his threats may be perceived as empty.
Overall, the article highlights the one-way nature of the current FX movements. Traders are seemingly not overly concerned about Suzuki’s verbal intervention attempts, as the market continues to move in one direction without much reaction. The Bank of Japan will likely need to consider more decisive actions if they wish to have a substantial impact on the exchange rate and potentially stabilize the market.
