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Interventions and Japanese economic recovery

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  • Takatoshi Ito

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Abstract

This paper attempts to explain possible reasons and objectives behind the 35 trillion yen (7% of GDP) interventions conducted by the Japanese monetary authorities from January 2003 to March 2004, and to discuss whether the interventions achieved the presumed objectives: making the movement of the yen flexible but orderly, and helping economic recovery. The motivation of starting intervention in January 2003 was to keep the yen from appreciating in the midst of financial and macroeconomic weakness. The economy started to show some strength in the second half of 2003, but interventions continued, with a brief pause in September. Reasons for interventions after September are two-fold. First, the interventions provided opportunities for unsterilized interventions. Second, the monetary authorities were extremely sensitive to speculative activities in the market.

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File URL: http://hdl.handle.net/10.1007/s10368-005-0034-0
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Bibliographic Info

Article provided by Springer in its journal International Economics and Economic Policy.

Volume (Year): 2 (2005)
Issue (Month): 2 (November)
Pages: 219-239

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Handle: RePEc:kap:iecepo:v:2:y:2005:i:2:p:219-239

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Web page: http://www.springerlink.com/link.asp?id=111059

Related research

Keywords: Intervention of foreign exchange market; The yen; Monetary policy; Japanese economy; E44; E58; F31;

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  1. Takatoshi Ito & Frederic S. Mishkin, 2006. "Two Decades of Japanese Monetary Policy and the Deflation Problem," NBER Chapters, in: Monetary Policy with Very Low Inflation in the Pacific Rim, NBER-EASE, Volume 15, pages 131-202 National Bureau of Economic Research, Inc.
  2. Takatoshi Ito & Tomoyoshi Yabu, 2004. "What Prompts Japan to Intervene in the Forex Market? A New Approach to a Reaction Function," NBER Working Papers 10456, National Bureau of Economic Research, Inc.
  3. Kathryn Dominguez & Jeffrey A. Frankel, 1990. "Does Foreign Exchange Intervention Work?," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 16, July.
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Cited by:
  1. Paul Welfens, 2010. "Transatlantic banking crisis: analysis, rating, policy issues," International Economics and Economic Policy, Springer, Springer, vol. 7(1), pages 3-48, May.
  2. Takatoshi Ito & Yuko Hashimoto, 2008. "Price Impacts of Deals and Predictability of the Exchange Rate Movements," NBER Chapters, in: International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy (NBER-EASE Volume 17), pages 177-217 National Bureau of Economic Research, Inc.
  3. Rasmus Fatum & Michael M. Hutchison, 2008. "Evaluating Foreign Exchange Market Intervention: Self-selection, Counterfactuals and Average Treatment Effects," Working Papers 022008, Hong Kong Institute for Monetary Research.
  4. Dominguez, Kathryn M.E. & Hashimoto, Yuko & Ito, Takatoshi, 2012. "International reserves and the global financial crisis," Journal of International Economics, Elsevier, Elsevier, vol. 88(2), pages 388-406.
  5. Ruelke, Jan C. & Frenkel, Michael R. & Stadtmann, Georg, 2010. "Expectations on the yen/dollar exchange rate - Evidence from the Wall Street Journal forecast poll," Journal of the Japanese and International Economies, Elsevier, vol. 24(3), pages 355-368, September.
  6. Chen, Ho-Chyuan & Chang, Kuang-Liang & Yu, Shih-Ti, 2012. "Application of the Tobit model with autoregressive conditional heteroscedasticity for foreign exchange market interventions," Japan and the World Economy, Elsevier, Elsevier, vol. 24(4), pages 274-282.
  7. Takatoshi Ito, 2007. "Myths and reality of foreign exchange interventions: an application to Japan," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 12(2), pages 133-154.
  8. Fatum, Rasmus & Yamamoto, Yohei, 2014. "Large versus small foreign exchange interventions," Journal of Banking & Finance, Elsevier, Elsevier, vol. 43(C), pages 114-123.

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