The yen's slide to the cusp of 150 per dollar has put investors on high alert for the risk of intervention. But, Japanese authorities could find propping up their currency both difficult to achieve and hard to justify.
At its core, the yen's 3% slide in September to its weakest in 11 months at 149.71 on Wednesday is a result of the Bank of Japan's hesitancy exiting an ultra-easy monetary policy while the U.S. Federal Reserve keeps its options open for further tightening.
Intervention is both financially risky and politically charged. To make even a ripple in the $5 trillion currency market, the BOJ would need to draw down massive amounts of dollar reserves. "How can you have a conversation and justify a strong yen in these conditions? There's not a lot you can put on the table."
"Politically and economically, it becomes problematic," he said. "The Japanese public is complaining about the rising cost of living, and although yen weakness is just one of several factors contributing to that, it's the most visible one."The yen careened to a 32-year trough at 151.94 last October before being reined in by several bouts of heavy intervention, the first by Japanese authorities in a generation.
Yen speculative short positions are well back from highs reached in mid July, according to CFTC data.
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