The dollar’s weakness and the yen’s strength reversed in 1995, with coordinated G7 intervention serving as a turning point. The reversal followed a W-shaped rather than a V-shaped pattern, and the background to coordinated U.S.-Japan intervention continued to influence subsequent developments.
In 1995, the dollar-yen exchange rate moved substantially beyond purchasing power parity, a period described as an abnormally weak dollar and strong yen. The subsequent phase of dollar weakness and yen strength was halted by coordinated G7 intervention, with the direction of the move signaled around April of that year.
The catalyst was coordinated G7 dollar-buying intervention, which expressed an intention to reverse the exchange rate toward levels below purchasing power parity. The actual reversal was gradual, however, halting in the upper ¥87 range after a little over one month before moving back toward ¥80 at the end of May.
The reversal during this period is described as W-shaped rather than V-shaped. Following a subsequent rebound, the abnormally weak dollar and strong yen moved toward an end. Further intervention was conducted in the latter half of 1995, and developments drew attention alongside structural factors.
After the financial-crisis-like period from 1997 onward, the dollar strengthened and the yen weakened, with the exchange rate approaching ¥150 in 1998. The background to coordinated U.S.-Japan intervention is viewed as having influenced both the peak of the abnormally weak dollar and strong yen and the subsequent shift in direction.