How to Profit From Japan's Stealth Currency Intervention

Japan's Finance Ministry confirmed on Tuesday that it had conducted stealth interventions in the foreign exchange markets in November of last year in an attempt to prevent the Japanese yen from climbing any higher. The Finance Ministry reported that it secretly sold 1.02 trillion yen ($13.3 billion) in the days following a massive 8.07 trillion ($105.4 billion) October 31 intervention that was done after the Japanese yen reached a post World War II high of 75.35 yen to the United States dollar. The 1.02 trillion yen stealth intervention was done in order to ensure that the effects of the earlier intervention did not quickly disappear. As investors lose confidence in the economies of the European Union and even question whether or not the eurozone can survive, they have been been moving funds into currencies that are considered safe havens, like the Japanese yen and the Swiss franc. The Swiss and the Japanese have long complained that their currencies are artificially high and that their exports are suffering because their business' products are becoming more expensive for their international customers. A rising currency is of particular concern to Japan because the Japanese economy is heavily dependent on exports and is still trying to recover from the disastrous tsunami and earthquake that struck Japan last year. Any increase in the value of the yen can cut significantly into the profits of important Japanese exporters like Toyota Motor Corporation TM, Sony SNE and Honda HMC and undermine Japan's economic recovery. By conducting covert currency interventions, the Japanese government can make it more difficult for currency traders to try to predict the movements of the Japanese yen against other currencies like the United States dollar. The Japanese government has threatened intervention in the past and Japanese Finance Minister Jun Azumi said that he was not ruling out any options that could be used to prevent the Japanese currency from rising further, so more stealth interventions could be on the way if the yen climbs higher. Although the news that Japan was willing to intervene in the currency market could have sent Japanese stocks climbing, the market might have been more concerned over the fallout from a possible Greek default. The Japanese NIKKEI 225 index of Japanese stocks ended trading on Tuesday down 11.68 (0.13%) to end the trading day at 8,917.52.