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Japanese authorities are relying heavily on psychological tactics to fight yen bears, which means keeping markets guessing about their foreign exchange intervention rather than overt attempts to arrest the currency’s decline to multi-decade lows.
The battered yen has whipsawed in recent weeks, which analysts and traders attribute to government efforts to prop up the currency against a relentlessly strong dollar, amid worries about the negative economic impact of sharp yen declines.
While the Ministry of Finance (MOF) confirmed its foray into the foreign exchange market on Sept. 22, it has not commented on other suspected instances of intervention since then, including a sharp move higher in the Japanese currency on Friday.
Similarly, Japan’s top currency diplomat Masato Kanda on Monday declined to comment, when the yen jumped to 145.70 against the dollar from around 149.70 in early Asia trade in another suspected yen-buying intervention.
Analysts say the strategy of staying mum keeps investors guessing on intervention, thereby discouraging speculators from testing the yen’s new lows.
That contrasts with Japan’s intervention after the 2011 earthquake and tsunami to quell sharp yen rises, in which authorities announced most interventions.
“With stealth intervention, authorities can give markets the impression they could be stepping in more frequently than they actually have,” said Atsushi Takeda, chief economist at Itochu Research Institute.
