Japan: “Leaning against the wind” is no argument in support of a sustainably stronger Yen – Commerzbank

Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, analyzes how Japanese policy could affect the Yen.

Japanese monetary policy and currency policy has not been particularly consistent over the past decade

For the time being – at least until the next round of bonus payments in winter – there will be no wage-price spiral. And that in turn is an argument in favor of the BoJ sticking to its ultra-expansionary monetary policy for now. The fact that neither the BoJ nor the MOF are happy about the weak Yen does not fit into this picture. However, Japanese monetary policy and currency policy has not been particularly consistent over the past decades. Therefore, that does not come as a surprise. And it does not constitute a JPY-bullish argument. 

If the MOF really wants to intervene at some point, it would likely conduct ‘leaning against the wind’. That's what I assume from the past. And ‘leaning against the wind’ is no argument in support of a sustainably stronger Yen.