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.