Quick recap:
- G7 releases a statement on FX with the usual platitudes about excess volatility, no mention of yen
- G7 releases a second (seemingly semi-official) statement saying the first statement was about the yen
- Yesterday, the US said it supports Japanese efforts to end deflation
- G20 meetings on Fri/Sat will talk about FX
The bottom line for me is that the US doesn’t have a problem. In the real world, the US has a virtual veto and the G7 and G20 so Japan will continue to do what it wants.
Secondly, the G20/G7 are so far from acting on JPY that there is no way it should be affecting current rates. My guess is that USD/JPY would have to get to 120 before talk began morphing to action.
Finally, the quick collapse of USD/JPY shows that longs are very nervous. That’s a scary sign but as the market grows more confident in longs, it will propel yen crosses much higher.