There’s intervention and then there’s intervention, and that became abundantly clear late last week. Even a hint that the United States might join Japan in propping up the yen completely changed the game.
“There’s been a general understanding that intervention by Japan alone doesn’t have much effect. But when the possibility emerged that the U.S. side might also step in, everyone was caught off guard,” said Masamichi Adachi, chief economist at UBS Securities Japan.
The yen has declined steadily since Prime Minister Sanae Takaichi became president of the Liberal Democratic Party in October, going from about ¥147 to the dollar to above ¥159. Bonds have also declined while stocks have rallied in what has become known as the “Takaichi trade.”
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