Economic analyst Morinaga Kohei (森永康平) explained the backdrop to the first Japan-U.S. coordinated intervention in 28 years, as well as the current state of the yen and its prospects.
At the end of last month, the Japanese and U.S. monetary authorities carried out coordinated intervention by buying yen and selling dollars, after the yen had weakened to around ¥164. The concern was reportedly not only the sharp depreciation of the yen, but also the possibility that the intervention could involve raising funds through the sale of U.S. Treasuries.
Morinaga Kohei (森永康平) noted that this was a special intervention carried out jointly by Japan and the United States, and explained that the exchange rate had recovered to ¥159.30. With ¥160, previously viewed as the line of defense, coming into view again so soon, he suggested that the market’s next focus would be whether further intervention would be carried out.
Although there were expectations immediately after the intervention that another intervention might follow, he explained that the yen did not recover immediately, instead recovering gradually. He also said that some in the market may view this as “the end of the matter.”
Asked about the benefits of selling dollars, he pointed out that a sharp depreciation of the yen could also affect Asian currencies such as the South Korean won and the Chinese yuan. If Japan needs to sell U.S. Treasuries to replenish its dollar holdings, concerns could arise that U.S. interest rates would rise, making a coordinated response important, he explained.