Japan has one trillion dollars in reserves. Goldman Sachs ran the numbers and determined this means Japan can do the dumb thing at least two more times. The dumb thing is buying yen to prop up the yen. The yen still sucks.
Last month Japan spent billions trying to convince currency markets that the yen is worth more than currency markets think the yen is worth. Currency markets were not convinced. The yen traded exactly where it wanted to trade approximately forty-eight hours later. Goldman looked at Japan's checking account and said hey you could lose that same bet twice more before you're actually broke. This is what passes for analysis at a bulge bracket firm.
The trillion dollars sitting there is not a strategy. It's a countdown timer. Every intervention is Japan flipping off the Forex market while the Forex market checks its phone and waits for Japan to finish. The market has infinite patience and zero feelings. Japan has finite dollars and a central bank that thinks theatrical gestures count as monetary policy.
Retail traders saw this headline and immediately began trading the yen both directions at once. They read "plenty of capacity for intervention" and heard "free money if I just guess which way Japan moves next." They will guess wrong. They always guess wrong. They'll blow up their accounts timing intervention rumors while Goldman's actual clients trade the dollar-yen carry and sleep fine.
The best part is Goldman saying "plenty of capacity" like a trillion dollars is a lot of money to lose fighting the bond market. A trillion dollars is two more tantrums. Two more chances to light thirty billion on fire and watch the chart return to exactly where it started. Japan's strategy is having enough cash to be wrong twice more at scale.
Goldman charges seven figures for research that concludes you can fail twice more before bankruptcy.
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