Foreign-exchange traders are becoming increasingly confident that the Bank of Japan will not stand in the way of further yen strength after the currency surpassed 100 per dollar for the second time this year.
Strategists at Bank of Tokyo-Mitsubishi UFJ Ltd. and Morgan Stanley see the yen extending this year's almost 20 percent gain versus the dollar, further confounding policymakers who are seeking to spur growth and inflation in the world's third-largest economy. As the currency surged Tuesday, Vice Finance Minister Masatsugu Asakawa said he is watching with concern to see if there are speculative moves in the foreign exchange market.
Forecasters who started 2016 predicting yen weakness have had to revisit calls predicated on Japan's ability to use rhetoric, monetary stimulus and quantitative easing to stymie the currency's advance. Efforts that would typically weaken the yen have proven largely ineffective this year, signaling that the BOJ may have run out of room to maneuver. At this point, the yen's strength appears to fall short of levels where the BOJ would consider entering the market to sell yen — a step that has not happened since 2011 — according to Mizuho Bank Ltd.