Yoshihiko Noda, in an unscheduled press conference yesterday, pledged “appropriate action” against the strong yen. What does the Japanese finance minister mean?

Currency traders like to translate action as intervention; which is, of course, precisely what Mr Noda hopes. The yen, having hit a 15-year high of Y85 to the dollar, obediently slipped back after his comments. But intervention will only be used in extremis. The political costs are too high and the benefits less assured than in the mid-1990s. The real effective exchange rate is well below the highs of that intervention-happy period (albeit similar to 2004, when the ministry of finance last went into the money markets). For another, manufacturers’ currency exposure is lower.

Toyota Motor, for example, made more than three-quarters of its vehicles in Japan in 2003; this year, local production will be less than half the total. But nor can Mr Noda afford inaction. Export growth still correlates with the trade-weighted exchange rate and Japan’s business lobbyists are a noisy bunch. His problem is that Japan has lost its competitive disadvantage: a zero interest rate. Before, having virtually the lowest interest rate on the planet made the yen a natural choice for financing carry trades. Foreign investors borrowed yen by the truck-full, while Mrs Watanabe decanted her housekeeping allowance into Aussie dollars, rands or anything else offering a yield pick-up. That game lost momentum once the developed world joined Japan in pushing interest rates to near-zero: three-month US and yen Libor rates crossed in 2009 and are now just a whisper apart. Navel gazing – seeing which central bank inches ahead of the pack on any form of quantitative easing – does little to change perceptions on currency at this stage. Mr Noda’s position is a thankless one. When the world is falling apart, it matters not a jot if your currency pays just a few basis points, your debt is twice economic output and you are on to your sixth prime minister in four years.