Beyond the Band-Aid: Why FX Intervention Can't Fix the Yen's Core Problem
In a recent analysis, Daisaku Ueno, chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities, presented a sobering assessment of Japan's ability to defend the yen. He contends that market intervention by authorities is merely a tool to suppress short-term speculative selling, not a cure for the currency's underlying weakness.
The Unyielding Structural Force Behind Yen Weakness
Ueno emphasizes that the primary driver isn't fleeting speculation. The persistent gap in real policy rates between the US and Japan creates a fundamental headwind. As long as this divergence exists, capital will flow toward higher-yielding assets.
- Rooted in Real Activity: Selling pressure stems from the investment decisions and genuine commercial needs of Japanese firms and individuals, making it structural.
- Limited Long-Term Impact： This structural nature means the "magic" of intervention is temporary. It can disrupt market momentum but cannot override the trend dictated by economic fundamentals.
The Policy Conundrum for Japanese Authorities
Finance Minister Sakura Kamikawa has stated the government is prepared to take appropriate action in the forex market if needed, signaling vigilance against excessive volatility.
Market observers, however, largely view such warnings as a form of verbal guidance. With structural forces in play, the efficacy and sustainability of pure yen-buying intervention are seriously questioned. A lasting solution likely hinges on monetary policy normalization or a fundamental improvement in economic growth—objectives far more complex than executing a market order.