Those who say central bank officials won't intervene argue that the financial crisis has ushered in a new era. Now, they say, even yen appreciation-sensitive Japan is willing to let the yen strengthen - viewing that as 'the lesser of two evils' compared to a possible loss of purchasing power in conjunction with a weaker dollar, due to the large U.S. budget deficit.

U.S.: not making Japan's task any easier

Of course, as officials in Japan would no doubt quickly point out, the United States could help stem the dollar's decline versus the yen and the world's other, major currencies by cutting its budget deficit, as soon as it's feasible to do so. Assuming the end of bank bailout and fiscal stimulus spending in 2010, some effort to rein-in entitlement spending (including Medicare and Medicaid costs via health care reform), and an income tax income on upper income groups, would cut the deficit considerably, and help stabilize the dollar. The other major factor affecting the dollar, the U.S. trade deficit, is already trending lower, due to the sustained pull-back in U.S. consumer spending on imports.

Currency Analysis: It's a new era for the dollar, yen, euro, and British pound: the post-financial crisis era. No longer does the yen reflexively decline when U.S. and European stock markets rise. During the leveraging boom, the yen did exactly that, as institutional investors borrowed yen to invest it abroad - the so-called 'carry trade'; not any more. Now, investors appear to be hedging: invest some new money in stocks, selectively, where bargains exist, while holding some yen as a hedge against a further weakening of the dollar, due to the large U.S. budget deficit.