The yen purchase intervention implemented by the government and the Bank of Japan for the first time in 24 years has put a stop to the depreciation of the yen, but has not changed the global divergence in monetary policy that is the cause of the depreciation of the yen. yen.
Unless the BOJ moves away from being the world’s most accommodating central bank, the impact of the intervention could be short-lived. While the Bank of Japan reaffirmed its control of the yield curve (YCC) this week, the US Federal Open Market Committee (FOMC) raised interest rates by 75 basis points (bp, 1bp = 0.01% ) for the third consecutive meeting. Monetary tightening continued from Indonesia to the UK and Switzerland ended negative interest rates.
“The intervention is an act that goes against the actions of the FOMC and the Bank of Japan,” said Mark Sobel, a former US Treasury Department official and US president of the Forum of Official Monetary and Financial Institutions (OMFIF). “So you should expect the impact to be short-lived,” he said.
In the foreign exchange market on the 22nd, the yen rose 2.6% at one point due to the intervention, reaching a level slightly above 140 yen against the dollar. Previously, the yen had fallen to 145.90 yen, the weakest level since 1998.
Source: Ministry of Finance, Bloomberg
Both the US Treasury and the European Central Bank (ECB) declared that they did not participate in the intervention.
“The action may not have been enough, but the brakes have been applied,” said Steven Jenn, CEO of Urizon SLJ Capital, which manages hedge funds. He said it might be possible to keep the dollar-yen exchange rate below 150 yen per dollar. “It is possible to slow the market down and control it at 145 yen,” he continued.
Original title:Japan’s historic intervention fails to alter the forces that weaken the yen(extract)
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