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Fresh Ammo to Use on the Yen

Japanese Flag
Photo: Bryan Jones
Japanese Flag

The Japanese cabinet has approved an increase in financing bill issuance. Here's what it means for the yen.

Experts scoffed earlier this year when Japan intervened to stem the yen's rise. Unilateral intervention rarely works, they said - and the yen's subsequent rise seemed to confirm that.

But Japan isn't giving up. Their latest move: Japanese Cabinet approval of more financing bill issuance, which will boost their intervention firepower from about $513 billion to about $897 billion, according to Barclays Capital. "The increased intervention 'ammunition' looks sufficient for several months, taking into account the possibility of intervention as large as 31 October," wrote Masafumi Yamamoto, a Barclays analyst, in a note to clients.

Decent U.S. economic data has been buoying the dollar, relieving some of the upward pressure on the yen. But just as Switzerland indicated its resolve when it intervened on the franc, Japan wants to show it means business, Yamamoto says. "We think the purpose of this increase is more to indicate the willingness of the Japanese government to fight a stronger JPY, if needed."

Scoffers, take note.

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