The Bank of Japan has changed its mode of operation in the foreign exchange market. It has become a Ninja.
Ninja are the covert operatives of Japanese military lore.
You can't see or hear them coming. Stealth is their craft.
On Friday, a senior Finance Ministry official revealed that Japan had sold about ?700 billion (US$5.88 billion) in foreign exchange in the course of intervention operations since mid-January. And who knew about this? The purpose was to weaken the yen against the dollar. So what else is new? Foreign exchange interventions in Japan are ordered by the Ministry of Finance to be carried out by the Bank of Japan. What is different about these transactions is that the central bank never said a word about them until it came out last week. Presumably the trades were conducted under strict secrecy with selected commercial banks.
Also puzzling is that the central bank did not enlist the help of other central banks to execute trades in various time zones other than Japan's. Some of the trades were conducted outside of the Tokyo foreign exchange time zone.
Central banks like to make it look like a bigger splash by enlisting the help of other central banks. It is also a matter of central bank etiquette. One central bank doesn't like to execute transactions itself in another central bank's trading time zone.
For that reason you expect the central bank to use the European Central Bank or the Bank of England in the European time zone or the New York Federal Reserve Bank in the US time zone. This time it was a go-it-alone operation.
The puzzle is that central banks usually -- but not always -- prefer to be anything but Ninja-like when it comes to foreign exchange operations. Their favorite tactic is to make a loud and visible intervention, especially when it is large, which ?700 billion is.
Still, the actual sum that a central bank expends during an intervention is small relative to the foreign exchange market. On top of that, most central banks, including the central bank, sterilize foreign exchange trades.
In a sterilized foreign exchange intervention, the central bank does two or more offsetting operations to neutralize the effect of its foreign exchange trading on the money supply.
For example, when the central bank buys dollars, that transaction on its own increases the Japanese money supply. The central bank can sterilize by selling domestic assets, a transaction that by itself lowers the money supply. If the amounts are equal the effects on the money supply will wash.
This, of course, leaves the question of whether a sterilized intervention, even a loud one, can permanently affect the foreign exchange market.
One school of thought is that sterilized intervention can't permanently affect the level of the exchange rate. But it can scare traders now and then. Often, exchange rates move violently during intervention. That's why the fear of future intervention is planted in the minds of foreign exchange traders.
There is fear and then there is paranoia. Fear is where you are long yen, and you fear the central bank might be poised to strike. You fear the Bank of Japan and you expect to see it in the market any moment.
Paranoia is when you are long yen and you are left to wonder if the central bank -- the Ninja central bank -- is in the market or not in the market.
PROTECTIONISM: China hopes to help domestic chipmakers gain more market share while preparing local tech companies for the possibility of more US sanctions Beijing is stepping up pressure on Chinese companies to buy locally produced artificial intelligence (AI) chips instead of Nvidia Corp products, part of the nation’s effort to expand its semiconductor industry and counter US sanctions. Chinese regulators have been discouraging companies from purchasing Nvidia’s H20 chips, which are used to develop and run AI models, sources familiar with the matter said. The policy has taken the form of guidance rather than an outright ban, as Beijing wants to avoid handicapping its own AI start-ups and escalating tensions with the US, said the sources, who asked not to be identified because the
Taipei is today suspending its US$2.5 trillion stock market as Super Typhoon Krathon approaches Taiwan with strong winds and heavy rain. The nation is not conducting securities, currency or fixed-income trading, statements from its stock and currency exchanges said. Yesterday, schools and offices were closed in several cities and counties in southern and eastern Taiwan, including in the key industrial port city of Kaohsiung. Taiwan, which started canceling flights, ship sailings and some train services earlier this week, has wind and rain advisories in place for much of the island. It regularly experiences typhoons, and in July shut offices and schools as
FALLING BEHIND: Samsung shares have declined more than 20 percent this year, as the world’s largest chipmaker struggles in key markets and plays catch-up to rival SK Hynix Samsung Electronics Co is laying off workers in Southeast Asia, Australia and New Zealand as part of a plan to reduce its global headcount by thousands of jobs, sources familiar with the situation said. The layoffs could affect about 10 percent of its workforces in those markets, although the numbers for each subsidiary might vary, said one of the sources, who asked not to be named because the matter is private. Job cuts are planned for other overseas subsidiaries and could reach 10 percent in certain markets, the source said. The South Korean company has about 147,000 in staff overseas, more than half
CHEMICAL FIRE: 10 Indian employees were injured by smoke inhalation at a Tata Electronics plant in Tamil Nadu state that produces components for Apple Inc At least 10 people received medical treatment, with two hospitalized after a major fire on Saturday disrupted production at a key Tata Electronics Pvt Ltd plant in southern India that makes Apple Inc’s iPhone components. The fire occurred at the plant in the city of Hosur in Tamil Nadu state that makes some iPhone components. It broke out near another building inside the Tata complex, which was to begin producing complete iPhones in the coming months. The fire was contained to one building and has been extinguished fully, top district administrative official K.M. Sarayu said. No decision has been made on when
RSS