Swiss National Bank decision this week to weaken the Swiss franc has raised fears that other central banks will follow suit in a wave of currency devaluations.

Since the financial crisis began two years ago, currency intervention from a major central bank had been seen as unlikely because foreign exchange moves were too low a priority to merit attention, much less a consensus among global policymakers. “The Swiss have broken the glass on beggar-thy-neighbour exchange rate policy,” said John Normand, global head of currency strategy at JPMorgan.

The SNB, faced with the prospect of deflation, said on Thursday the Swiss franc’s strength was an “inappropriate tightening” of monetary conditions. The SNB said it intervened to prevent any further appreciation.

The Swiss franc, which had been approaching its record high against the euro of about SFr1.43, set in October, was sold off sharply after the announcement. It fell 3.6 per cent against the euro and 2.9 per cent against the dollar. With interest rates already near zero, currency policy has become a tool for the Swiss authorities to fight the global economic slowdown. “If other countries were to follow using this tool, this would raise memories of the beggar-thy-neighbour policy of the prewar era and would increase risks of protectionism in general,” said Ulrich Leuchtmann, head of FX research at Commerzbank. “With Japan facing deflation risks at least on the same scale as Switzerland, it is unsurprising to see market participants now focusing on the Bank of Japan.”

Like the Swiss franc, the yen has rallied sharply: the Japanese currency has risen 8 per cent against the dollar since Lehman Brothers collapsed in September.

Both Switzerland and Japan are export-driven economies sensitive to the exchange rate. Their currencies were also widely used before the financial crisis as funding currencies in the global carry trade, in which low-yielding currencies were sold to finance the purchase of riskier, higher-yielding assets elsewhere. As the financial crisis deepened and investors scrambled to unwind carry trades, both the yen and the Swiss franc were driven sharply higher.

Analysts believe that the SNB’s action adds to pressure for Japan to resume more aggressive quantitative easing. But they said this was likely to focus on BoJ purchases of domestic assets, rather than foreign exchange intervention.

“We continue to view the yen as a politically more inflammatory currency than the Swiss franc,” said Ray Farris, currency strategist at Credit Suisse. This is partly because the yen’s weight in the US dollar’s real effective exchange rate is 12 per cent compared with 1.1 per cent for the Swiss franc.