Why Has the Yen's Decline Not Stopped Despite Japan-U.S. Intervention and BOJ Rate Hikes? How Realistic Are the “Three Scenarios” for a Shift to Yen Appreciation?

The article argues that a shift away from yen depreciation will be difficult even with intervention by the Japanese and US monetary authorities and accelerated BOJ rate hikes, and sets out the conditions under which yen depreciation will continue and those that would lead to a shift toward yen appreciation. US Treasury Secretary Bessent said that the yen is undervalued and expressed the view that the Bank of Japan needs to raise interest rates. Japan and the United States conducted rate checks in January this year to deter further yen depreciation, reportedly surprising the market, and have continued to intervene since then. Dollar-yen fell from nearly ¥164 to the ¥155 range at one point in August before rebounding to the ¥160 range.

The author argues that the long-term effect of actual intervention to stop yen depreciation is limited and points out that monetary policy adjustments are essential for a shift toward yen appreciation. The article says that US interest rates currently have a major impact, while Japanese interest rates are expected to remain low, and concludes that developments in both Japan and the United States should be closely watched in assessing the outlook for dollar-yen. The next page estimates the outlook for dollar-yen in light of conditions in Japan.