There are sound arguments for Japan sitting on the sidelines as the yen skids to a four-decade low.
Turning the currency around, never easy at the best times, has just become harder given the renewed embrace of the greenback. Prime Minister Sanae Takaichi’s government certainly won’t be pushing on an open door.
The most successful currency interventions contain an element of surprise and, with a bit of luck, can help shift market psychology. Renewed purchases would give the beleaguered yen a boost, but are unlikely to result in any substantive change in the way traders are thinking. The dollar looks set to enjoy a period of strength after new Federal Reserve Chairman Kevin Warsh made a forthright commitment to combating inflation. The yen will languish for at least a while longer. Tokyo has little to gain from fighting that sentiment too aggressively.
