Derek Halpenny, European Head of GMR at MUFG, suggests that the Japanese Finance Minister Aso spoke in early Tokyo trading today helping to stem the relentless buying of the yen, expressing concern over the “excessive” and “one-sided” moves promising to “take action as needed”. Key Quotes “This is certainly evidence of an upturn in the strength of rhetoric in regard to the direction of the yen that implies greater probability of action. USD/JPY fell by 5.4% from the high on 29th March to yesterday’s low and by 11.5% since the high on 29th January following the BOJ’s decision to implement a negative policy rate. So FM Aso has a point that moves have been one-sided! The scale of this current account surplus is not fundamentally compatible with an under-valued currency and hence there is a strong underpinning to the advance of the yen that would be difficult to halt with intervention. At over 120.00, our internal PPP estimate implied a 26% overvaluation. That’s correcting now but USD/JPY is still in overvalued territory. The Japanese authorities last intervened in 2011 – in March after the earthquake and tsunami on a coordinated basis with other countries and then solely in August, October and November of that year. The March 2011 intervention was triggered by disorderly price action (USD/JPY fell by over 4% on that day of intervention – 17th March) and the other occasions were when USD/JPY was below the 80.00 level. Disorderly price action would appear the only plausible scenario of triggering intervention now and the March 2011 scenario may be the benchmark of how disorderly price action may need to become.” For more information, read our latest forex news.