Market Analysis: High Threshold for Japan-US Joint Intervention on Yen, Unlikely to Occur in the Short Term

Odaily News Market analysts indicate that the exchange rate check conducted by the New York Fed last Friday is the clearest signal to date that Japanese and US authorities are closely cooperating to curb the yen's depreciation, which has also kept the market highly vigilant for intervention. However, direct coordinated intervention may not occur as quickly as expected. Junya Tanase, Chief FX Strategist for Japan at JPMorgan, stated: "Past coordinated interventions have only occurred under extremely rare circumstances. There remains a considerable distance from a joint exchange rate check to actual coordinated intervention." Shota Ryu, FX Strategist at Mitsubishi UFJ Morgan Stanley Securities, said: "The US may be reluctant to buy a currency that has been depreciating for five consecutive years. It might cooperate with a small-scale intervention but is unlikely to take actions that could fundamentally reverse the yen's downward trend." If Japan continues to intervene, it would need to sell part of its US Treasury holdings, which could push up US bond yields—an outcome the US may be unwilling to see amid already volatile market conditions. A further decline in the US dollar could add fuel to the "Sell America" trade that has heated up again recently. Takuya Kanda, an analyst at Gaitame.com, noted: "Against the backdrop of concerns about global de-dollarization, the US is unlikely to directly participate in intervention actions that involve selling the US dollar." (Jin10)