Japan and the United States conducted yen-buying intervention for the first time in approximately 28 years, driving the yen higher and the US dollar lower. The medium- to long-term direction of the yen was explained with reference to purchasing power parity.
Japan’s and the US’s finance authorities and the Bank of Japan conducted yen-buying intervention on 30 July, followed on 31 July by a move to coordinated intervention by Japan and the United States. Japan’s Minister of Finance, Katayama Satsuki (片山さつき), suggested on 3 August that further coordinated intervention could be conducted.
After the intervention, the yen appreciated against the US dollar, with the exchange rate moving from around ¥163 per US dollar to temporarily around ¥155. US Treasury Secretary Bessent indicated that he still considered the yen to be significantly undervalued after the intervention.
Purchasing power parity was cited as a long-term benchmark, and it was noted that the yen and South Korean won were particularly undervalued, trading below their purchasing power parity levels. It was suggested that the yen could settle below its purchasing power parity level over the medium to long term.
As a long-term outlook, an estimate indicated that USD/JPY could reach around ¥100 if it returned to purchasing power parity, and could appreciate to around ¥140 when the South Korean won’s deviation rate was taken into account. Purchasing power parity in countries with current-account surpluses tends to rise over the medium to long term, and the yen could likewise follow an upward trend over the medium to long term.