File image of Satsuki Katayam. Copyright by World Economic Forum / Jakob Polacsek.
With the pound, euro and dollar giving us nothing during a 12-hour window of packed central bank action, it falls to the yen to offer us the entertainment.
The yen got our hearts beating with a surge in value ahead of the month-end that looks like a mass bailout by traders who have been shorting the currency.
Fears of imminent intervention by authorities look to be behind the move: USD/JPY reached 160 earlier on Thursday, but then Japan's Finance Minister, Satsuki Katayama, said "we are nearing the time to take bold action on FX."
That was enough to prompt traders to bail on short JPY positions.
But what started as a selloff soon became a fire sale: Forty minutes later, Vice Finance Minister Mimura warned that "this is my final warning."
Analysts say the comments by Mimura (the Vice Minister for International Affairs, often referred to as Japan’s chief currency diplomat) carry more weight than the usual jawboning by Katayama.
"Saying 'final warning' is unusually stern for him," says Luis Hertado, analyst at CIBC Capital Markets.
This verbal intervention comes at month-end, meaning there will have been some typical month-end flow and option expiry, adding fuel to the flame too.
USD/JPY extends its drop to 2.75% for the day, reaching 156.056; GBP/JPY is lower 2.40% at 210.97: these are gargantuan moves in a FX market that is altogether pretty well contained.
"In the story of The Boy Who Cried Wolf, the wolf eventually comes. And he arrived today in the form of a massive push lower in USDJPY," says Brent Donnelly, analyst at Spectra Markets. "This is different from past interventions which were triggered by a combination of level and rate of change. So that changes the calculus going forward and creates a bit of a brick wall at 160.00 now."
With the move catching market attention, Japanese authorities have denied that intervention has happened, with the Ministry of Finance saying Japan hasn't intervened in FX markets in April.
Yet, based on Katayama's earlier comments, authorities will be very happy to see how price action has transpired following a bit of simple jawboning.
Despite the surge, some analysts expect some dip buying in the major pairs like USD/JPY to return and recent losses could rapidly unwind as intervention doesn't deal with the underlying fundamentals that are sending the yen lower.
"Assuming that intervention is unilateral and oil prices stay high, we would expect USD/JPY to work its way back to the 161/162 area quite quickly, given that the fundamentals are firmly yen-negative," says Chris Turner, head of FX analysis at ING Bank N.V.
Robin Brooks, Senior Fellow at the Brookings Institute says "FX intervention never works to stop the depreciation trend of the Yen in the medium term. Not in 2024 and not earlier this year. It won't now either."
Yet, what today has probably effectively achieved is a signal that 160 is a hard barrier beyond which the yen won't go. That'll be 'job done' for the authorities in Japan.
