On the 22nd, the central bank of Japan implemented a foreign exchange intervention to buy the yen for the first time in more than 24 years to prevent the weakening of the yen, but it was analyzed that the effect would be limited.
On the 24th, Yonhap News reported, “This is because the difference in interest rates between the US and Japan, which is considered the cause of the decline in the value of the yen, has not been resolved.”
According to the Nikkei Shimbun, Japan’s short-term policy interest rate is -0.1% and the 2-year Treasury bond yield is -0.07%, showing a big difference from the US policy rate (3-3.25%) and the 2-year Treasury bond yield (4.11%).
“The lesson learned from Japanese intervention in the late 1990s is that the initial market reaction is most likely to be the greatest,” JP Morgan observes.
After the central bank of Japan intervened in foreign exchange on the 22nd, the exchange rate fell to the 140 yen level in the Tokyo foreign exchange market, but rose again to the 143 yen level per dollar in the London foreign exchange market the next day.
The media said, “Considering the peculiarities of US-Japan relations, it will not be easy for the Japanese government to intervene in foreign exchange using US government bonds.”
Reporter Hyo-rim Jeong Bloomingbit [email protected]