Bloomberg have written a piece on the mechanics of a Bank of Japan intervention in USD/JPY

I wrote a similar, briefer, piece yesterday when we saw the 'rate check', but this is adds a little more and is well worth reading if you are unfamiliar with how it all works.

Link is here.

The BOJ carries out any intervention in the currency market at the behest of the Finance Ministry
  • First up is so-called verbal intervention
  • When ... jawboning may not be sufficient, the Bank of Japan can call traders asking for a "rate check" ... It's a step short of actual yen sale, and can serve as a sort of warning for traders to avoid one-way bets
  • If the BOJ wants to buy or sell, they'll say "mine" or "yours" in response to a quote and will intervene in currency markets. If they're merely checking the rate, they may say "never mind" or "nothing" before hanging up.

Also, Marcus in the comments to my post yesterday said the BOJ was 'smoothing' - that's right. Initially the intention is to slow the yen gain (in this case)

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Oh, I really should add - central banks can leave limit orders in markets also - that's another form of direct intervention.

Oh, and also ... this sort of model outlined by the Bloomberg article, verbal, then rate check, then actual intervention ... is also followed by other CBs, of course. (ps. Other central banks do not need the go ahead from their Ministry of Finance like the BOJ do).