The U.S. support for Japanese efforts to bolster the yen has allowed the currency to strengthen by approximately 5%, moving from just above 163 yen per dollar, its lowest level in four decades, to 157 yen per dollar. UBS analysts however believe that Japan’s policy mix is unlikely to generate sustained yen strength, with real rates remaining negative. Reports suggest the U.S. Treasury may have sold euros rather than dollars to buy yen, marking a departure from traditional coordinated interventions. HSBC emphasizes that a structural shift in the Bank of Japan’s policies will be key for any sustained currency rally. Robin Brooks of the Peterson Institute for International Economics goes so far as to suggest that this coordinated intervention could weaken rather than strengthen confidence in the yen.
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