Amid a buzz of speculation over whether the Bank of Japan would intervene, the Japanese Yen hit yet another 15 year high against the U.S. Dollar last Tuesday.

Before USDJPY made its new low of 83.57, the Japanese Trade Balance had been released showing a surplus of 0.61T that was somewhat higher than the expected 0.47T.

Official Phone Discussion Gives Impression BOJ Will Stand Aside

Prior to the new low, Prime Minister Naoto Kan and BOJ Governor Shirakawa had a phone discussion about recent forex market developments and "economic conditions at home and abroad". This gave forex traders the impression that the BOJ would hold off on intervening against the Yen, and so they basically began selling USDJPY.

Nevertheless, the U.S. Dollar quickly recovered from its lows by trading back up above the 84.00 level. USDJPY eventually reached a high of 85.18 before closing the Tuesday session at 84.89.

On Wednesday, Yoshihiko Noda, the Japanese Finance Minister, held a meeting with Prime Minister Kan and commented that Japanese authorities would, "have to take appropriate action when necessary" to counteract the stronger Yen levels.

Furthermore, in additional comments made later that day to reporters in Tokyo, Finance Minister Noda stated, "We have to take appropriate action when necessary, though I plan to continue to watch currency movements very closely with great interest." He went on to say that, "My basic understanding is that movements have been one-sided."

A History of Japanese Central Bank Intervention

The last time the Bank of Japan intervened in the currency markets was on March 16^th, 2004, when the Japanese Yen was trading at 109.00 to the U.S. Dollar. The Bank sold a total of 14.8 trillion Yen in the first quarter of 2004 after having sold a total of 20.4 trillion Yen in 2003. Despite the intervention, the Yen ended 2004 lower at 102.63 to the Dollar.

Before the 2003 to 2004 period, the Bank of Japan actively intervened in the currency markets from September 17^th of 2001 to June 28^th of 2002, along with the New York Federal Reserve Bank who stepped in to intervene to weaken the Yen on September 27^th 2001. The USDJPY level at the time of these interventions was near 123.00 and intervention continued through the end of June of 2002.

In addition, from January of 1999 through April of 2000, the Bank of Japan intervened 18 times in the forex market, as well as once through the Federal Reserve and once through the European Central Bank. Nevertheless, despite this intervention, the Yen continued strengthening, eventually reaching the 102 level by April of 2000.

The Japanese Yen had made its previous high point on April 1^st of 1995 - no joke intended - when the Yen reached a postwar high of 79.75 to the Dollar after repeated interventions by the Bank of Japan and the U.S. Federal Reserve.

Fed and ECB Support for BOJ Intervention Seen as Unlikely

Because of the current global economic situation, a concerted intervention effort to weaken the Yen by the Bank of Japan acting along with the U.S. Federal Reserve and/or the European Central Bank is currently seen as rather unlikely by forex market observers.

Furthermore, due to soft economic situations in both Europe and the United States, neither region would seem to be very willing to see their currencies get much stronger.

Basically, a stronger currency may mean consumers pay cheaper prices for foreign imports but it also means less local money would be received for a country's exports. Both of these factors can be a deterrent to a country's economic growth.