Synopsis:

Nomura provides an analysis on the potential limits of Japanese forex intervention, considering historical data, Japan's foreign exchange reserves, and U.S. Treasury reports. They highlight that while alarm bells might ring if intervention reaches ¥9-13 trillion, the actual capacity for intervention could be higher.

Key Points:

• Intervention Limits: Market concerns may arise if intervention amounts reach ¥9-13 trillion, based on past interventions and Japan's current forex reserves.

• Potential for Greater Intervention: Despite market concerns, Nomura suggests that Japan has the capacity for a greater amount of intervention than the market anticipates.

• Role of U.S. Policies: U.S. actions, particularly those of the Treasury Department regarding foreign exchange policies, will be crucial in determining the scope and impact of Japan's intervention efforts.

• IMF Constraints: Nomura is skeptical about the idea that International Monetary Fund (IMF) constraints would significantly limit Japan's ability to intervene in forex markets.

Conclusion:

Nomura's analysis suggests that Japan may have more leeway in managing its currency through intervention than is commonly perceived. The effectiveness and scope of these interventions will heavily depend on the actions of the U.S. and the broader international response.