US Intervenes Again to Support Yen, But Fundamental Issues Remain Unaddressed

Last week's dramatic interventions in currency markets by the Bank of Japan and the US Treasury have seemingly faded. However, analysts believe that another intervention may be necessary to prop up the yen, which was once at a record low against the dollar.

The BoJ spent an estimated $US87 billion ($123.2 billion) over two days last week, while the US Treasury invested up to $US10 billion to buy yen and drive the exchange rate up from 164 yen to the dollar to 155.21 yen to the dollar. Despite this effort, the yen has since slipped back down to just over 157.7.

The fundamental economic factors that caused the yen's decline are still present, including Japan's extreme government debt levels (over 200% of GDP), rising inflation, and Prime Minister Sanae Takaichi's plan to cut consumption taxes and boost spending on defense and technology.