Japan and the United States carried out coordinated intervention to support the yen, but Bank of Japan rate hikes and a narrowing interest-rate differential will be key to the currency's long-term stability. The view is that the market reaction will remain short-lived and that structural factors are more important.
The U.S. and Japanese governments carried out coordinated intervention on 1 August to support the yen. Japan's intervention was estimated at approximately $36 billion-$59 billion, while the U.S. side participated by selling euros rather than dollars.
USD/JPY temporarily fell from around ¥160 to the 155-yen range before returning to around ¥159. Sustained yen appreciation over the long term is considered dependent on Bank of Japan rate hikes and a narrowing interest-rate differential with the United States.
The author acknowledges the significance of the intervention itself, but points out that its long-term effects will be limited without a fundamental policy shift. If U.S. interest rates and economic growth remain stronger than Japan's, intervention alone will not stabilize the yen's appreciation.