LONDON — Japan faces the risk of stark criticism from major global political powers after it defied international convention with its super- charged intervention to weaken the yen Wednesday.
The Group of Seven richest economies, of which Japan is a member, have generally agreed in recent years that direct intervention should be used only to counter alarmingly rapid currency climbs, particularly those stemming from speculative attacks. The yen’s recent climb doesn’t fit that bill.
That means that if the Bank of Japan keeps selling yen on the Ministry of Finance’s behalf, U.S. officials and others may start issuing carefully worded criticisms on the Japanese move, making tense international relations on the currency markets even frostier.
“The MOF can only afford to drive the yen so far over a series of days before criticism will likely start to emerge, particularly given the heightening tensions that have emerged on the currency-policy front over the past few weeks,” said Simon Derrick, a senior currencies analyst at the Bank of New York Mellon in London.
The scale of Wednesday’s intervention took most market- watchers by surprise. Traders say the currency sting involved as much as $12 billion in yen sales, making this one of the authorities’ biggest dollar- buying splurges on record.
