16th September 2010
The Bank of Japan intervened alone, selling an estimated ¥1 trillion (£7 billion) and finance minister Yoshihiko Noda vowed "bold action and further intervention if necessary."
But Sander Levin, chair of the House Ways and Means Committee in the US, described Japan's action as a "deeply disturbing development".
However, for investors the move is a welcome one. As Ward says: The ‘battle of the yen' could be the trigger for renewed central bank monetary base expansion, adding to the picture of an improving liquidity backdrop for markets and suggesting further strength in equities, commodities and other ‘risk' assets in late 2010."
As he explains: "Official intervention to weaken a currency is more likely to succeed when the exchange rate is overvalued relative to fundamentals and investor sentiment is at a bullish extreme, implying that opposing buyer power has been exhausted.
"These conditions do not apply to the yen currently, suggesting that massive, unsterilised intervention will be required to stem the currency's rise.
"A consequent large increase in the Japanese monetary base would improve prospects for global equities."