Plus Ca Change in Japan?

Last week was a good lesson in terms of what might, or what might not, happen when policy makers attempt to steer currency markets. Notwithstanding the obvious question of much how clout policy makers de-facto holds with respect to moving currency markets (not a lot I think), the outgoing finance minister in Japan Hirohisa Fujii has on several occasions made it clear that he, for one, is not worried about a stronger Yen only to revert slightly as markets responded with a; "well then, lets go ..." In general however, it does seem as if Fujii's general position has been that a strong Yen perhaps would not be so bad since it would only serve to boost purchasing power. This is of course true, but it also highlights a rather alarming disconnect between the fundamentals of the Japanese economy stuck in export depedency and deflation and policy makers economic analysis (or spin) of the situation.

Now, Fujii has stepped down due to health reasons and perhaps in an attempt to enter the office with a bang instead of a whimper, his replacement Naoto Kan kicked off his first public appearance by noting that he, for one, would like the Yen to be a little bit weaker and that he believed the MOF and the BOJ should cooperate to make it so. Having not forgot the last time in 2002 that Japan intervened by selling Yen, markets reacted swiftly by giving the Yen a nice jolt downwards (against the USD).

Yet, that position lasted only one day;