USD/JPY: direct invention still unlikely - BTMU

Analysts at Bank of Tokyo Mitsubishi explained that they still believe that direct intervention remains unlikely in the near-term given strong opposition from the US.

Key Quotes:

"Japanese policymakers may even be more reluctant to intervene ahead of the US Presidential election given that both Donald Trump and Hillary Clinton are campaigning on more protectionist trade platforms. Recent comments from US Treasury officials have clearly signalled that they do not believe that fundamentals justify direct intervention."

"The US Treasury has stepped up its monitoring of unfair currency practices and will now undertake an enhanced analysis of exchange rates and externally-oriented policies if: i) an economy has a significant trade surplus with the US which is larger than USD20 billion, ii) an economy has a material current account surplus larger than 3.0% of GDP, and iii) an economy has engaged in persistent one-sided intervention in the FX market conducting repeated net purchases of foreign currency totalling more than 2% of its GDP over the year.

Japan has been placed on a new monitoring list as it has met the first two criteria. The final third criteria could be met if direct intervention totalled over JPY10 trillion."