Tuesday's intervention in the currency market by the government and the Bank of Japan to prevent a further rise of the yen against the dollar — the first in 6 1/2 years — appears to have worked, at least temporarily. It was as if the government and the BOJ had been waiting for a chance to intervene. They acted right after Prime Minister Naoto Kan had been re-elected chief of the Democratic Party of Japan and the yen had risen to ¥82.80 against the dollar.
To further push an easy money policy and help prevent the yen from strengthening, the BOJ also decided not to intervene in the "sterilization" process — that is, it refrained from selling national bonds and carrying out other operations to recover the yen that had found its way into the market as a result of yen selling and dollar buying.
The intervention Tuesday succeeded in lowering the yen's value by more than ¥2 against the dollar. But what the government and the central bank face is not a short-term problem. They must prepare themselves for a possibly long battle in which they'll have to steer adroitly through the treacherous waters of foreign currency markets.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.