Ten days after G7 called for more currency flexibility, dealers are still not sure what game Japan is playing with the foreign exchange markets.
Talk abounded today that Japan had resumed its policy of intervention after a post-G7 lull, selling yen for dollars as the Japanese currency stormed to fresh three-year highs against the dollar.
Earlier this year the mere mention of the Bank of Japan would have sent the yen into retreat. But this time yen bulls and dollar bears stood their ground.
"We won't know whether Japan really did step in until intervention figures are published next month. What we do know is that markets have sensed a shift in Japan's FX policy after the G7," said Mr Bilal Hafeez, currency strategist at Deutsche Bank.
As European trade got under way, market sources in Tokyo said the Bank of Japan was seen continuously selling yen, although London dealers were less sure.
Concern that a strengthening yen could jeopardise Japan's export-led recovery has prompted Japanese authorities to sell more than 13 trillion yen already this year. Data released today would indicate intervention was particularly aggressive at the end of August and start of September.
Japanese officials have denied any shift in policy but the yen has continued to climb, rising more than seven yen against the dollar and three yen against the euro in the past two weeks alone.
Japan's economy grew at an annualised 3.9 per cent in the April-June quarter, the best growth performance of any G7 country, while the key tankan confidence survey tomorrow is expected to show its best reading in more than two years. "An economic recovery in Japan makes intervention harder to justify," said Deutsche Bank's Hafeez. "My guess is Japan will try to slow the yen's appreciation, at best, rather than defend a particular level."