Bank of Japan steps in, but effect on yen unclear

The Bank of Japan intervened in the yen's exchange rate for the first time in years, briefly arresting the yen's decline against the backdrop of the US Federal Reserve's aggressive interest rate hikes, but analysts believe that the long-term effect remains to be seen.

After the Fed announced an interest rate increase of 75 basis points on Sept 21, the yen fell significantly against the US dollar, prompting Japan's central bank to announce it would continue to implement large-scale quantitative easing, making Japan the only major economy to maintain negative interest rates.

After BOJ governor Haruhiko Kuroda said that the policy of continued quantitative easing has not changed and the adjustment of financial policy will be two to three years away, the yen continued its decline against the US dollar, approaching the 146:1 mark as of 5 pm that day, a 24-year low. However, less than an hour later, the yen briefly recovered to 140:1, prompting speculation that the Japanese government had intervened to buy the yen and sell dollars. Senior finance officials later confirmed this was the case.