Japan and the United States carried out their first yen-buying intervention in 28 years, but its effect was limited, and the yen may resume weakening. The causes lie in structural factors affecting the Japanese economy, requiring long-term measures.
Japan and the United States jointly intervened to buy the yen in an effort to halt its decline, but the effect is reported to have been temporary. Some believe the yen will continue to weaken even after the intervention.
The intervention is said to be no more than a policy measure that buys time to curb sharp market movements, rather than a fundamental solution. Factors behind the yen's current weakness include Japan's economic earning power, growth expectations and problems with capital allocation.
What is needed going forward is not an increase in the amount of intervention, but a comprehensive review of the Bank of Japan's monetary policy, government finances, energy dependence and the economic structure needed to encourage domestic investment. It is considered important to create policy incentives to buy the yen and an environment that increases domestic holdings of yen-denominated assets.
The view has been expressed that continued yen weakness may not be a temporary market anomaly, but a sustained phenomenon reflecting the problems facing the Japanese economy.