USD/JPY, Trade, Intervention

The extended analysis since April to the BOJ began as a cursory view to interest rates. Once interest rates were known, a deeper view was initiated by reading research papers, methodologies to economics and exchange rates. The BOJ is no different than all central banks to economics, methodologies, exchange rates and interest rates. All central banks are the exact same to figuring and factoring.

Study the BOJ and all will know every last detail to every central bank on the planet. The BOJ not only explains every concept in deep detail but they show terrific charts alongside explanations.

The herd mentality to today’s traders says the BOJ will intervene. Surely , the BOJ intervened October 2022 at 150’s which means they will intervene again at 150.00’s.

I disagree to intervention based on Japanese Trade as exports exceed imports.

From the Index of trade for the United States = Exports 149.5 Vs Imports 140.1. The Export Index gained +13% and minus 12.3 to Imports. No intervention here.

A further view is Europe as Exports = 167.6 Vs Imports 145.7. Exports gained 12.9% and Imports dropped 5.9%. No intervention here.

The overall trade balance was positive to exports exceed imports. No intervention here.

Japanese trade is released around the 20th of every month. The next giant release and most important is the monthly Corporate Goods Price Index and released the 12th of every month.

Corporate Goods Price Index Monthly = Exports Yen Basis = 1.7 Vs Imports 2.1. No alarm bells to intervention.

Corporate Goods Price Index Yearly = Exports Yen Basis 2.5 Vs Imports -14.00. Beautiful and no intervention.

The BOJ views the monthlies but intervene on the yearly. But the BOJ is slow to act on intervention as they must see a severe problem to Imports far exceeding exports.

Exports and Imports are the driving force to exchange rates beside interest rates.

What does slow mean for the BOJ is seen in the Corporate Goods Price Index leading up to October 2022 intervention.

August 2022 monthly = Export Yen Basis -2.3 Vs Imports Yen Basis -2.1. No bells or insights to Intervention.

August 2022 Yearly = Exports Yen Basis 17.4 Vs Imports Yen Basis 43.1 and a 25 point difference. August screams for intervention but never materialized.

September 2022 Monthly = Exports Yen Basis 2.9 Vs Imports Yen Basis 5.3. Again no alarm bells.

September 2022 Yearly = Exports Yen Basis 20.2 Vs Imports Yen Basis 48.7 and a further widening by 28.5 points. September also screams for intervention but never happened.

October 2022 Monthly = Exports Yen Basis 1.1 Vs Imports Yen Basis -0.3.

October 2022 Yearly = Exports Yen Basis 18.7 Vs Imports Yen Basis 42.3 and a 23.6 point difference.

The BOJ had August, September and October as horrendous trade figures when Imports exceeded Exports but it took 3 months before intervention.

In terms of Real Exports and Imports when GDP and Oil are factored into trade numbers, Exports exceed Imports. Exports exceed Imports as a % of GDP.

Trade is the absolute reason for BOJ intervention and trade currently runs perfectly. Why did the BOJ intervene October 2022 on an overbought USD/JPY and DXY. Both traded at extremes. They intervened due to correct Trade exports to imports.

Brian Twomey

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