The Japanese government and Bank of Japan have intervened in the foreign exchange market by injecting massive funds totaling approximately 55 trillion won to defend the yen. Despite the unprecedented cooperation that even included the U.S. government, skepticism is mounting that the yen's chronic weakness will not be easily reversed.

This intervention is estimated to have been implemented after the yen/dollar exchange rate plummeted to 157.80 yen in the New York foreign exchange market on July 30 (a rise in yen value). In the Bank of Japan's current account balance forecast as of the 3rd, the "fiscal and other factors" item decreased by 8.2 trillion yen, while the prior market forecast predicted a decrease of only 1-2 trillion yen, suggesting that an intervention of 6-7 trillion yen (approximately 55-64 trillion won) was implemented. This is interpreted as Japanese authorities taking defensive measures on July 31 as well, when the yen's volatility increased shortly after the Tokyo market opened.

Market experts believe the U.S. government also participated in this intervention. U.S. Treasury Secretary Scott Bessent was confirmed to be carrying a memo on "purchasing yen valued at 5-10 billion dollars (approximately 7-14 trillion won)," and exceptional simultaneous intervention by both Japan and the U.S. through banking notifications via the Federal Reserve Bank of New York has become concrete. This demonstrates that the U.S. administration's concerns about the yen's weakness have intensified.

[사진=연합뉴스]

However, a pessimistic view dominates regarding whether the massive intervention will lead to a rebound in yen value. About three months ago, in late April to early May, the Japanese government and Bank of Japan injected 11.7 trillion yen (approximately 107 trillion won), the largest scale on record, into the foreign exchange market, yet the yen weakness trend actually accelerated and persisted. This past experience of failing to reverse market trends despite pouring enormous funds suggests limitations in this cooperative intervention.

Masafumi Yamamoto, chief foreign exchange strategist at Mizuho Securities, strongly questioned the sustainability of this intervention's effects. Strategist Yamamoto definitively forecasted that "the yen appreciation effect from this intervention will not continue due to the Takaichi Sanae administration's expansionary fiscal policy and the Bank of Japan's accommodative monetary stance." This reflects analysis that the government's expansionary fiscal position and the Bank of Japan's loose monetary policy will continue to exert downward pressure on yen value.

Despite unprecedented cooperation between the Japanese and U.S. governments, experts' pessimistic outlook remains unchanged that the yen appreciation effect will be difficult to sustain. The Takaichi Sanae administration's proactive fiscal policy and accommodative monetary stance are identified as fundamental causes perpetuating yen weakness, suggesting that large-scale exchange rate interventions may have only temporary effects and fail to address structural problems in the Japanese economy. Continuous observation of future yen exchange rate movements and the next steps by Japanese policy authorities is necessary at this point.