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Foreign Exchange Intervention and Monetary Policy in Japan, 2003-04

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Author Info

  • Rasmus Fatum

    (School of Business, University of Alberta)

  • Michael M. Hutchison

    (Department of Economics, University of California)

Abstract

This article examines the rationale behind the massive increase in Japanese foreign exchange market intervention operations in 2003-04, and evaluates its effectiveness both in limiting yen exchange rate appreciation and influencing the direction of monetary policy. The two main questions addressed in this study are: Was the intervention effective in slowing exchange rate appreciation compared to a counterfactual case with no intervention? And, has intervention on such a large scale authorized by the Ministry of Finance been able to directly influence liquidity creation or indirectly influence the stance of Bank of Japan policy?

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Bibliographic Info

Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 05-05.

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Length: 21 pages
Date of creation: Oct 2004
Date of revision: Jan 2005
Handle: RePEc:kud:epruwp:05-05

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Keywords: foreign exchange intervention; Japanese monetary policy;

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References

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  1. Takatoshi Ito, 2002. "Is Foreign Exchange Intervention Effective?: The Japanese experiences in the 1990s," Discussion Paper Series a428, Institute of Economic Research, Hitotsubashi University.
  2. Rasmus Fatum & Michael Hutchison, 2002. "Effectiveness of official daily foreign exchange market intervention operations in Japan," Pacific Basin Working Paper Series 2003-01, Federal Reserve Bank of San Francisco.
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Citations

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Cited by:
  1. Fatum, Rasmus & Hutchison, Michael M., 2010. "Evaluating foreign exchange market intervention: Self-selection, counterfactuals and average treatment effects," Journal of International Money and Finance, Elsevier, vol. 29(3), pages 570-584, April.
  2. Tsutomu Watanabe & Tomoyoshi Yabu, 2011. "The Great Intervention and Massive Money Injection: The Japanese Experience 2003-2004," CARF F-Series CARF-F-266, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  3. Rasmus Fatum, 2010. "Foreign Exchange Intervention When Interest Rates Are Zero: Does the Portfolio Balance Channel Matter After All?," EPRU Working Paper Series 2010-07, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  4. Rasmus Fatum, . "Official Japanese Intervention in the JPY/USD Exchange Rate Market: Is It Effective and Through Which Channel Does It Work?," EPRU Working Paper Series 2009-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Jan 2009.

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