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Japan has been struggling to curb a relentless drop in the yen that pushes up import prices and stokes broader inflation, hitting households’ wallets and Prime Minister Sanae Takaichi’s public approval ratings.
Tokyo’s solo intervention conducted between late April and early May caused only a brief yen rebound. The BOJ’s June rate hike to a 31-year high of 1 per cent also gave the struggling currency little lasting boost.
Friday’s joint intervention followed Tokyo’s solo intervention worth up to US$58.97 billion in New York markets a day earlier.
In a sign of further Japan-US coordination, Bessent said the United States would consider increasing in coming months the size of the Federal Reserve’s repurchase facility providing temporary dollar liquidity, calling the tool an “important backstop”.
The comment followed the Japanese finance ministry’s rare X post on Saturday that it had “a broad range of tools to address market liquidity needs”, including access to the Fed’s repurchase facility providing temporary dollar liquidity.
The Fed facility, introduced in 2020 to steady markets during the COVID-19 pandemic, allows Japan to raise dollar liquidity without outright sales of US Treasuries, potentially easing funding pressures on Tokyo for intervention.
Still, the facility is “unlikely to change perceptions about the limits of Japan’s intervention capacity, as borrowing is capped by the amount of Treasury holdings pledged as collateral”, said Rinto Maruyama, FX and rates strategist at SMBC Nikko Securities.
Some analysts doubt whether the latest round of action could counter structural factors driving down the yen, such as the rising cost of fuel from the Middle East conflict and the still wide Japan-US interest rate differentials.
“The announcement effect of joint intervention is much bigger than solo action by Japan,” said Tsuyoshi Ueno, a senior economist at NLI Research Institute.
“But the fundamentals driving yen weakness haven’t changed, so we likely won’t see one-sided yen rises from this intervention.”
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