Coordinated yen-buying intervention by Japan and the United States was carried out, strengthening efforts to curb yen depreciation. Going forward, the three main areas of focus are the possibility of additional intervention, the BOJ's pace of rate hikes, and measures to stabilize the bond market.
The governments of Japan and the United States announced that they had conducted coordinated yen-buying intervention on 31 July, and markets moved toward correcting the yen's depreciation. The article presents Nomura Securities strategist Goto Yujiro's commentary on the background to the coordinated intervention and the outlook for foreign exchange.
After the intervention, upward pressure on USD/JPY eased. The pair plunged temporarily from the ¥163 range to below ¥158, then corrected to the lower ¥155 range on 3 August. The market is now assessing whether the pair will recover to the ¥160 range or correct again below ¥155, with views that the response of Japanese authorities will influence market developments.
The three key responses by the Japanese authorities are additional intervention, the BOJ's pace of rate hikes, and measures to stabilize the bond market. Debate over BOJ rate hikes has increased the foreign exchange market's sensitivity to policy, and the article also presents the view that the likelihood of a September rate hike is increasing.
The article also discusses estimates of the scale of foreign-exchange reserves and the possible use of the Federal Reserve's FIMA Repo Facility. It points out that, from the perspectives of funding and market impact, the combination of fiscal and monetary policy will affect the sustainability of efforts to correct the yen's depreciation. The sustainability of future intervention and changes in market sentiment will be closely watched.