USD/JPY trades at the level of 144. That means speculation about possible Bank of Japan (BoJ) interventions is on the up again. But as economists at Commerzbank note, the effect of interventions is usually short-lived.

JPY depreciation triggers intervention speculation

“A government official has already said that the government will take the ‘necessary responses’ if the current movement continues. And at the last monetary policy meeting, the central bankers underlined that they would pay close attention to the developments in the FX market, with one member of the monetary policy committee referring explicitly to the negative effects of rapid yen depreciation. However, the effect of interventions is usually short-lived.”

“We assume that inflation momentum will ease globally next year. If it then emerges, as we expect, that all major central banks will end their rate hike cycle in the coming months the JPY weakness is likely to end of its own accord as the gulf between the other central banks and the BoJ will then no longer expand much further.”