Japan is wrong to try to prop up the yen
Supporting the currency is expensive and futile
It is easy for investors to lose a fortune in the financial markets—and even easier for governments. In 2022 Japan spent more than $60bn of its foreign-exchange reserves defending the yen, its first intervention to strengthen the currency since 1998, after the exchange rate fell to nearly ¥146 to the dollar. And for what? Today the yen is weaker still. Yet instead of learning that fighting the market is futile, policymakers are repeating the mistake. After falling to ¥160 to the dollar on April 29th, its lowest in 34 years, the currency twice moved sharply upwards in the subsequent days. It seems the government is buying again, to the tune of tens of billions of dollars.
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This article appeared in the Leaders section of the print edition under the headline “Let the yen fall”
Leaders May 4th 2024
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