Authorities Cautious of Intervention as the Yen Plunges After Japan's Rate Hike

Even after the Bank of Japan raised its benchmark interest rate, the yen’s value fell in the foreign exchange market, leading observers to believe that Japanese authorities carried out a “rate check” to assess market conditions. According to Japanese media outlets including Nikkei, as of the 19th the yen exchange rate against the dollar had risen to the 158yen range immediately after the Bank of Japan’s interest rate decision the previous day, before later falling back to the 156yen range. In the market, this yen weakness is seen as having been driven by some policy board members’ opposition as well as expectations that the pace of future additional rate hikes may not be fast. A rate check is a procedure in which authorities confirm trading conditions with major banks and others before intervening in the foreign exchange market, and it is regarded as a signal indicating the possibility of actual intervention. In the market, concern is also growing that the Japanese government and the Bank of Japan may step in during the holiday period with largescale yenbuying and dollarselling intervention. Previously, these authorities carried out intervention totaling more than 15 trillion yen in July and August.