FX Intervention won’t fix Japan’s credibility problem

Joint US-Japan intervention provided some initial support to the yen. However, the currency has since given back some of its gains, and we don’t believe official purchases can substitute for a credible policy mix. Reports that PM Takaichi attempted to influence the BoJ to restrain long-term yields may even deepen investor concerns. But if we’re right that fiscal guardrails will hold, while monetary policy continues to normalise, there should be scope for the yen to strengthen over the medium term.