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Japan intervenes to prop up the yen

Published Sep 22, 2022 04:23AM ET Updated Sep 22, 2022 10:17AM ET
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© Reuters. FILE PHOTO: Coins and banknotes of Japanese yen are seen in this illustration picture taken June 16, 2022. REUTERS/Florence Lo/Illustration/File Photo

LONDON/TOKYO(Reuters) -Japan intervened in the foreign exchange market on Thursday for the first time since 1998 to shore up the battered yen, in the wake of the central bank's decision to maintain ultra-low interest rates that have hammered the currency. [nL1N30S30X]

"We have taken decisive action (in the exchange market)," vice finance minister for international affairs Masato Kanda told reporters, responding in the affirmative when asked if that meant intervention.

The yen jumped by as much as 2.2% against the U.S. dollar to around 140.31 yen after the announcement. The Bank of Japan's commitment to super-low interest rates had weighed on the Japanese currency, which has lost 22% in value this year.

Earlier on Thursday, the currency hit a 24-year low of 145.90 against the dollar. It was last up 0.8% on the day against the dollar at 142.90 and up 0.5% against the euro at 140.99. [FRX/]



"This sort of intervention will not be able to overpower the discrepancy in monetary policy between the U.S. and Japan … Where you can really move the needle, comes when you have an increment in interest rates."

“Now you’re going to have a knee-jerk reaction and yen will strengthen a little bit, but after a while, it’s just going to move back to the 145 level.

“In the near term, (there is) almost no scenario that you can see a reversal in this trend. It’s just whether they can keep it sort of controlled or within a rangebound dynamic.”


"There are two things from here: One, how the U.S. counterpart responds, and two, what (Prime Minister Fumio)Kishida says about it.

"I think it's hard for Japan now to get a welcoming message from the U.S. on intervention while the BOJ is not changing their easing bias, and the U.S. wants the dollar to be strong to curb inflation.

"Without moving away from Abenomics, the policy doesn't change from weakening the yen, (and the effect may be shortlived).

"In short, I think this intervention is probably done by Japan alone, without the backing of the U.S. and perhaps without the backing of the BOJ. Only when Kishida appoints a new governor to the BOJ that's when a strong message can be sent to the market."


“With the Tokyo market closed tomorrow (on a national holiday) and the BOJ’s decision to maintain policy today, there was an increasing risk of the yen sliding further in a thin market. The government intervened at the very last minute this evening after the rate hit the line that prompted the rate checks last week and before the market can get volatile.”

“The line of 145-146 yen per dollar will be seen as the ceiling for a while. But the next FOMC is looming in just over a month and the U.S. Fed keeps up with rate hikes, much remains uncertain about the Fed’s course depending on indicators coming till then. If the Fed’s rate hike is seen accelerating, the risk of further yen weakening is of course remaining.”

“We must check the U.S. Treasury Department’s response – if they issue comments that signal some level of understanding on the yen’s rapid weakening and the Japanese government’s action, then the risk of further yen decline will be smaller. Otherwise, Japan wouldn’t be able to take the step again.”


“The first Japanese currency intervention in near a quarter century is a significant, but ultimately doomed step to defend the yen. It has been the dramatic currency outlier this year, losing over 20% of its value versus the dollar. But this has been fundamentally driven, with Japanese interest rates rock-bottom and economic growth sluggish. As long as the Fed stays on the hawkish, rate-raising front foot, any yen intervention is likely to only slow, not halt, the yen slide.”


“Unless there is a clear shift in the fundamental backdrop driving Japanese yen weaker, the ability to turn the trend is limited.”

“The Ministry of Finance may see this as buying some time and hope that the Fed completes its tightening cycle by year-end. which may help to bring some degree of turn in the trend.”


"If this move was aimed at slowing the upside in dollar/yen it could have an impact. Will it be successful in turning dollar/yen around? I don't think so.

"Given that we just had the BOJ underpinning a very loose monetary policy and that came just after the Fed underpinned a hawkish outlook, I think the fundamentals will drive dollar/yen higher.

"But what Japan is doing is sending a signal that it's not a free ride to drive dollar/yen higher."


“With rate hikes by the Fed and Swiss National Bank, that widened the interest rate gap between Japan and overseas, Japan took the actual step further than a verbal warning. Because the market was expecting no actual action, the government apparently tried to change the view.”


"For traders, the lip service from Japanese officials this year was always viewed as a short-term hurdle, as they have repeatedly shown a lack of appetite to follow it up with actual FX intervention. This has now changed, with the BoJ taking the fight to the yen shorts.

While this policy will be successful in driving dollar-yen lower in the short-term, policymakers' ability to take dollar-yen lower over the medium-term is subject to more scepticism under the Fed's aggressively hawkish stance and the limited nature of Japan's FX reserves.

In order to achieve a stronger yen over the medium-term, we continue to believe that the BoJ will need to abandon its ultra-loose policy stance as FX intervention efforts will prove unsustainable."


"The next logical step was to actually intervene, now it seems from the headlines that this is unilateral, as opposed to multilateral, so it’s just the Bank of Japan and the Ministry of Finance interveneing rather than the Japanese asking for the assistance of other central banks. Ultimately, the question will be: how much has it been?"

"For the time being, that has injected some more two-way risk into dollar-yen."

Japan intervenes to prop up the yen

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