Ok, we were wrong. Despite the victory of Japanese prime minister Naoto Kan against his intervention-pushing challenger Ichiro Ozawa, Japan has intervened in the currency market for the first time since 2004.
The yen immediately plummeted, and continues to fall even now. Below we show the dollar in terms of yen, thus an upward move implies a weakening of the yen.
Longer-term perspective for today’s move, in one day the yen has re-traced its entire move since August:
Both bonds and stocks are rallying and one explanation is that Japan’s intervention in the currency market is the equivalent of monetary easing, as they are basically just printing yen and then selling it into the open market.
Benchmark 10-year bond yields fell seven basis points to 1.035 per cent as of 3:34 p.m. in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The 1 per cent security due September 2020 rose 0.628 yen to 99.682 yen. That was the biggest decline for 10-year yields since Oct. 6, 2008.
10-year bond futures for December delivery gained 0.74 to 142.12 at the 3 p.m. close of the Tokyo Stock Exchange. The Nikkei 225 Stock Average jumped 2.3 per cent, the sharpest advance since July 28.
The Nikkei is up over 2%: