First off, we should note that despite the massive plunge in the yen — thanks to BoJ intervention — global markets don’t seem to be moving too violently. So far it’s confined, just going by the futures markets.
But what’s interesting is the way it was done, namely, with no telegraphing at all.
In fact, the BoJ had fully convinced markets that it basically was content to sit on its hands and do nothing, and the PM who won his party’s support this week was of the anti-intervention bent.
Thus when the decision was made to intervene the result was brutal and ugly (see the chart below).
This is how intervention works best — out of nowhere, catching markets by surprise. Think of two men who fight in a bar. Probably best to bet on the guy who’s not doing all the pre-fight trash talking.
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