USD/JPY is back above 80 today, a development that will no doubt be a welcome relief for the MoF. Just a week ago it was down near 78.50 and looking rather ominous; suddenly, the MoF was probably weighing up industrial-scale intervention in an attempt to weaken the yen. However, risk appetite has improved a little since then (although it has been choppy), and interest rate differentials have moved against the currency. The failure of the Fed Chairman to press the button on QE3 just yet has helped the dollar at the margin, and also lifted longer-term rates in the US.
Also a factor has been a more aggressive tone of leading policy officials in Japan. For instance, the BoJ’s Ishida remarked on Thursday that the Japanese central bank needed to be bold when necessary, and that another easing next month cannot be ruled out. The MoF will be pleased if USD/JPY remains above 80 through the summer months.