C. Schaap,
I think you've got the situation in hand. The problem for the BoJ
is that they will become predictable and the currency traders will have
them for lunch. If the market pressure is for a lower Yen and they
predictably prop it up at certain levels, the traders will trade on that
formula and make it more expensive for the BoJ. Then there comes the
question of whether the BoJ will want to keep doing that forever. If too
many market players get in to the game of taking the BoJ's lunch money
there will be enormous pressure against the Yen and if the BoJ quits
intervening that will be that. Of course the BoJ knows this and tries to
keep the *threat* of intervention looming over traders without getting
into the game too much.
Behind all this is the strong Yen policy. Why the Japanese should
pursue such a policy I don't know. Perhaps it has to do with preserving
Japanese companies' purchasing power for materials. It certainly doesn't
serve the needs of exporters. The purchasing power idea makes a certain
amount of sense when taken together with the stated desire to ease credit
(despite the fact that this weakens the Yen). It makes sense if the
Japanese are trying to prop up very weak corporations. It seems to me
that if it has gotten to the point that the Japanese are pursuing
contradictory policies (cheap money/strong Yen) it may auger very bad
news.
peace
