US, Japan Joint Intervention Fails to Sustain Yen's Rise Amid Fundamental Weakness

A joint intervention by the US and Japan has temporarily boosted the yen's exchange rate, but analysts are skeptical about its sustainability.

The yen strengthened around 5% after the intervention, rising to around 157 per US dollar from a four-decade low of above 163 per US dollar. However, market participants believe that intervention alone is not enough to reverse the yen's weakening trend.

UBS strategists Teck Leng Tan and Dominic Schnider said that Japan's economic policies have not been able to create a sustained strengthening of the yen. They expect the normalization of BOJ policy to continue gradually, with real interest rates remaining in negative territory.

A change in the BOJ's policy direction is seen as crucial for sustaining the yen's strengthening in the long term, according to HSBC. The Japanese government also needs to show a stronger stance in supporting the yen's strengthening and reducing fiscal expansion ambitions.