The sharp yen appreciation and dollar depreciation at the end of July are said to have been achieved through coordinated US-Japan intervention, with the lessons of 1995 and 2011 informing an overview of the challenges ahead.
Coordinated US-Japan intervention is said to have been clearly behind the sharp yen appreciation and dollar depreciation at the end of July. The Japanese and US financial authorities carried out the intervention in coordination, with the objective of curbing excessive yen appreciation in the market emphasized.
1995 and 2011 are cited as past examples of coordinated intervention, and the latest action was reportedly positioned as another bilateral coordinated intervention. In 1995, a response integrated with monetary easing supported efforts to curb yen appreciation, while in 2011, similar coordination was described as a turning point for the yen exchange rate.
Meanwhile, the 1998 episode was set against concerns over the financial stability of financial institutions and the impact of the Asian currency crisis, and the effectiveness of coordinated intervention was also said to have been limited. One view reported regarding the latest intervention is that the United States may have indicated a stance of avoiding dollar selling.
Although the framework for coordinated US-Japan intervention has been established, major challenges are said to remain. The Treasury Secretary has pointed to the importance of preventing the spillover of currency depreciation and aligning the policy directions of Japan and the United States, while coherence between fiscal and monetary policy and the direction for reversing yen depreciation are expected to be focal points from the summer onward.