If there are no interventions despite increasingly high USD/JPY levels the market might easily come to the conclusion that the MOF is a toothless tiger. If this situation arose the verbal interventions would turn out to be counterproductive in retrospect. As they would not only have turned out to be incapable of preventing medium-term JPY weakness but because very easily such a revaluation of the MOF might cause momentum, that might lead to higher USD/JPY levels than would have been seen in a scenario when the MOF had remained silent on the subject of JPY exchange rates.

And in fact, the MOF is now in a tricky situation. There is no reason for interventions at present. The period of JPY weakness is over. And it makes no sense and would be completely futile for the MOF to take action against general USD strength. However, their previous chatter means that they are now under pressure to act.

The moral of the story: ‘verbal interventions’ are not the free lunch they may seem to be at first glance.