US-Japan Intervention Fails to Boost Yen Amid Weakening Fundamentals
CNN interviewed Scott Bessent about the joint US-Japan intervention to strengthen the yen. The intervention, which occurred on Thursday and Friday, involved Tokyo selling nearly $59 billion of US dollars to buy yen in New York markets. The US has not confirmed the size of its own intervention, but a photograph from a cabinet meeting showed notes with '$5-10 bil' scribbled next to 'To Do: Buy Japanese Yen'.
Most experts doubt that this move will be effective for more than a short while, as it does not address the underlying fundamentals weakening the yen. These include rising import prices and Japan's diminished ability to sell exports without a weak yen.
Some experts believe that if the Bank of Japan hikes rates, it could boost the yen. However, data shows that this theory no longer holds true, as the gap between American and Japanese interest rates has halved since October 2024, yet the yen has continued to weaken from ¥150/$ to ¥164 just prior to the intervention.
Bessent is among those who expect the BOJ to hike rates, but notes that this would be a step behind the curve.