The yen continued to weaken even after the first coordinated Japan-U.S. intervention in 28 years. Around two weeks after the intervention, dollar/yen reached the mid-¥159 range, and the market is said to have become focused on the limits of the U.S. Treasury secretary's willingness to sell dollars, against the backdrop of remarks hinting at intervention.
The coordinated Japan-U.S. yen-buying intervention was an extraordinary move, marking the first such action in 28 years, but the yen's decline did not stop, and dollar/yen had moved into the mid-¥159 range as of the time of writing. This represented a decline of just under 3% from the approximately ¥155 level immediately after the intervention, with the yen's weakness particularly pronounced compared with other currencies.
Amid attention on remarks by the U.S. Treasury secretary hinting at additional intervention, some observers have suggested that the actual scale of the intervention may have been small, while reports also emerged of other moves, such as selling euros and buying yen. The market is also seen as viewing the authorities as reluctant to sell dollars, and some believe additional intervention will be key to correcting the yen's decline.
While the Japan-U.S. interest-rate differential has been cited as a factor behind developments following the intervention, observers have pointed to factors that cannot be fully explained by the differential alone. Concerns about fiscal expansion and speculation surrounding government appointments are also seen as factors that strengthened expectations of further yen weakness.
Caution will be necessary over a rise in volatility during any future intervention. If additional intervention takes place, it could trigger adjustments in asset positions and increase the risk of a broader market decline.