For the first time in more than a decade, foreign-exchange traders are confident the Bank of Japan won't intervene in the currency market, paving the way for the yen to extend its biggest rally since 2000.
Japanese authorities sold the currency on all four occasions since 1995 when the yen approached the 100 to the dollar mark in a bid to support exporters from Toyota Motor Corp. to Sony Corp. When the yen strengthened to an eight-year high of 101.43 last week, Finance Minister Fukushiro Nukaga stopped short of signaling that officials are concerned, only saying the government needs to watch currency moves "carefully."
An attempt to influence exchange rates would bring Japan into conflict with the U.S., which relies on a weak dollar to underpin an economy on the verge of a recession. Citigroup Inc. and Royal Bank of Scotland Group PLC, the third- and fourth-biggest traders, say Nukaga will let the yen break 100 because it's 40 percent weaker than its peak in 1995 on a trade-weighted basis.