It's All I Can Stands, And I Can't Stands No More

Finance Minister Tanigaki Sadakazu made a virtual declaration of his candidacy for the position of LDP president last night.

Tanigaki's unwillingness to come right out and declare himself a candidate shows perhaps a bit more common sense than we are used to seeing from him (a sensible proposition from Tanigaki being notable mostly for its lonesomeness). All the newspapers this morning noted that he has virtually no chance of becoming Japan's leader.

As the cartoon in the Yomiuri Shimbun put it, the wheel's still in spin, but...

Yomiuri Shimbun, 16 May 2006, morning edition, p. 4.

All of which is to the good, as Tanigaki has today managed to blow everyone's collective minds out as regards currency markets.

Forex - US dollar off highs vs yen on profit-taking, Tanigaki comments UPDATE
AFX News Limited

TOKYO (AFX) - Japanese Finance Minister Sadakazu Tanigaki told parliament that in theory it is possible that the government will sell its holdings of US Treasuries to fund future intervention in the currency market.

He also told the finance affairs committee of the upper house that Japan does not have to reduce its huge foreign reserves, which are 'set aside for intervention in the future.'

Asked under what general circumstances the ministry might opt to sell its US Treasuries holdings, Tanigaki said: 'Basically they are foreign currencies, funds for conducting forex intervention, so our basic stance is to use them at such a juncture.'

'We have to be ready for such an occasion to use them, but I would not comment how high such possibility can be,' he added.

You cannot comment how high such a possibility can be?

I can. The possibility is zero.

Zero. Nil. Rien. Nada.

Why?

Because--parliamentary testimony to the contrary -- you cannot sell U.S. Treasuries for use in foreign exchange interventions, even "in theory" -- unless you intend to use those funds to strengthen the yen.

Which the Japanese government does not want to do.

Ergo, the possibility is zero.

Now, I know Tanigaki has been Minister of Finance for only a brief time...ok, two and a half years...and during that time he has had to think about the yen-dollar exchange rate only about...every single day.

I also know I cannot expect a holder of a bachelor's of law from Tokyo University (special 8-year degree program) and a Japanese law degree (failed the bar 5 times) to have a specialist's knowledge of markets and prices and all that esoteric money-related stuff.

And I know that it is possible that someday the yen will be plummeting like a stone... and that this fall could be so great the Bank of Japan will sell some of its Treasuries for actual dollars...that the BOJ would then use those dollars to buy yen off the spot market...reducing the world's floating supply of yen...and thus raising the yen's price relative other currencies.

But we do not have that problem now...nor can I recall a single instance since the Plaza Accords of the BOJ intervening to strengthen the yen.

The yen's problem has always that the yen is too strong.

So, can someone please explain to me what it was that Minister Tanigaki thought he was saying?


Later - This post has been edited for clarity.