SINGAPORE: Amid growing speculation that the Bank of Japan (BOJ) may step in to intervene in the forex markets to stem the yen's rise, some analysts say it is unlikely to happen at its policy meeting later this week. They argue that any such move will be short lived and have limited impact. Concerns over a potential debt default in the US have sparked a sell-off in the greenback, sending investors turning to safe haven assets. Thio Chin Loo, Senior Currency Strategist, BNP Paribas, said: "A lot of investors, particularly the sovereign wealth funds have put some money into the non-dollar assets - not so much the eurozone assets because of the debt issues that they are facing there now, but increasingly into Japanese bonds as well as equities." Such strong fund inflows into Japan have pushed the Japanese yen to four month highs and it now near its all-time peak of 76.25 yen to the dollar. That is raising concerns about the fallout a strong yen may have on the Japanese economy. It has also sent Japanese officials warning about the rising yen, raising the spectre of market intervention by the Bank of Japan. Still, analysts say the BOJ is unlikely to take any such steps at its meeting later this week. Takahira Ogawa, Director, Sovereign Ratings, Standard & Poor's, said: "I think given their policy orientation, I don't think that there will be any significant measures to stem the pace of the appreciation of the Japanese yen against the US dollar. "There is relatively limited measures for the Japanese government. Of course, the Bank of Japan can increase the size of the money supply, which could help in the long term. But it's not a short term measure." Thio Chin Loo, Senior Currency Strategist, BNP Paribas, said: "The yen is not outstandingly strong or overvalued against the US dollar. So, I think from that basis, there is much less reason for the Bank of Japan to step in, to intervene unilaterally. "For intervention to work in FX markets, you need to have a coordinated intervention. At this stage, it's very unlikely with what the eurozone and the US are facing back home, for them to want to step into the markets to support the US dollar or to support the Euro. So, any coordinated intervention at this stage is quite unlikely." Analysts also point to the one-month dollar-yen volatility, which is currently at 10 per cent - way below the five-year average of 13 per cent. This suggests that the yen's current strange is still not causing a dislocation in Japanese financial markets. Going forward, market-watchers expect the yen to test new highs, given the uncertainty over the US growth outlook. Now, some analysts say the deal does not put the US fiscal position on a sustained path, and it will not prevent the country from losing its coveted AAA credit rating. The question is whether will ratings agencies pull the trigger this week or wait a little long.

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