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International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page An Assessment of the Impact of Japanese Foreign Exchange Intervention: 1991-2004
Alain P. Chaboud; Owen F. Humpage
2005-824  (January 2005)

Abstract:  We analyze the short-term price impact of Japanese foreign exchange intervention operations between 1991 and 2004, using official data from Japanís Ministry of Finance. Over the period as a whole, we find some evidence of a modest "against the wind" effect, but interventions do not have value as a forecast that the exchange rate will move in a direction consistent with the operations. Interventions conducted between 1995 and 2002, which were large and infrequent, met with a much higher degree of success. For the most recent episode of intervention, in 2003 and 2004, despite the record size and frequency of the overall episode, it is difficult to statistically distinguish the pattern of exchange rate movements on intervention days from that of all the days in that particular subperiod, showing little effectiveness. Still, while the evidence of Japanese intervention effectiveness is modest overall, it appears to be stronger than that found using similar techniques for U.S. intervention operations conducted in the 1980s and 1990s.

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foreign exchange, intervention, Japan

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