Joint US-Japan Intervention Fails to Boost Yen Confidence

A joint US-Japan intervention has taken place to prop up the yen, but analysts are skeptical about its long-term impact. The Bank of Japan (BOJ) and the US have spent $70 billion in April and May to support the currency, but it has repeatedly rebounded only briefly.

The coordinated intervention on August 3 has triggered a squeeze in short positions, which is the largest in nearly two years, according to analysts. The yen rose 1% in early Asian trade to a high of 155.20 per dollar, its strongest level in about three months, after hitting a 40-year low of 163.99 in July.

Analysts believe that faster interest-rate increases from the BOJ are necessary to keep speculators at bay and prevent another decline in the yen. Fred Neumann, chief Asia economist at HSBC, said that a surprise hike by the BOJ would go a long way in resetting expectations around the central bank's determination to tighten monetary policy.

However, some analysts remain skeptical about the effectiveness of the intervention without complementary monetary policy adjustments. They argue that the impact on the yen will be short-lived unless there is follow-up from policymakers, including faster rate hikes from the BOJ.