Explainer-What would Japanese intervention to boost the weak yen look like?

📆 10/3/2023 11:55 PM
📰 YahooFinanceCA

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Japanese authorities are facing renewed pressure to combat a sustained depreciation in the yen, as investors eye prospects of higher-for-longer U.S. interest rates while the Bank of Japan remains wedded to its super low interest rate policy. The yen strengthened sharply against the dollar on Tuesday, leading some market participants to believe Japanese policymakers had intervened to support the currency, although others said the size of the move was not convincing enough. Japan bought yen in September of last year, its first foray in the market to boost its currency since 1998, after a Bank of Japan (BOJ) decision to maintain its ultra-loose monetary policy drove the yen as low as 145 per dollar.

TOKYO - Japanese authorities are facing renewed pressure to combat a sustained depreciation in the yen, as investors eye prospects of higher-for-longer U.S. interest rates while the Bank of Japan remains wedded to its super low interest rate policy.

By staying mum, authorities can keep investors guessing and discourage speculators from testing the yen's new lows - a tactic known as "stealth intervention." If the yen's slide accelerates and draws the ire of media and public, the chance of intervention would rise again. While Japan holds nearly $1.3 trillion in foreign reserves, these could be substantially eroded if Tokyo intervened heavily repeatedly, leaving authorities constrained over how long they can defend the yen.

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