Japan Intervenes in Foreign Exchange to Curb Yen's Slide

Facts

• In its first foreign exchange intervention in roughly 11 years, on Thursday, the Japanese government and its Bank of Japan (BOJ) began selling US dollars to boost the yen. The yen had fallen to its lowest value in 24 years.
• Following this move, PM Fumio Kishida asserted in a speech at the New York Stock Exchange that further interventions are likely in case speculation causes "any excessive volatility".
• This comes after Japan's central bank indicated that it had no plans to abandon its 'ultraloose' monetary policy and raise rates soon, making the currency's value plummet.
• Though several central banks – including the US Federal Reserve – have hiked interest rates to control rising inflation, Japan remains an exception with a -0.1% rate despite inflation having exceeded a 2% target for five months in a row.
• After hitting a peak of 145 yen per dollar, the Japanese currency recovered after the intervention was announced. The dollar fell 2.6% to 140.31 yen during the day and closed at 143.21 yen.
• So far this year, the yen has lost 20% of its value against the dollar.

Sources: Asahi, Reuters, Nikkei, Al Jazeera, Business Insider, and CNN.

Narratives

• Pro-establishment narrative, as provided by Kyodo News. This surprise and rare market intervention is a much-needed response from the Kishida administration. This will help to tackle rising import costs, which have been damaging Japan's economy. The government has been actively weighing options to reduce volatility and is carefully walking a fine line to achieve the best results.
• Establishment-critical narrative, as provided by Japan Times. Selling dollars isn't enough to restore the yen's value. The impacts of this intervention will be limited as Japan won't be able to keep intervening for much longer. To deliver a solution to its weakening currency, the Bank of Japan must follow the example of the Fed and many other central banks and raise rates.