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Daniel Moss

Japan’s Intervention Underlines Its Interest-Rate Isolation

The yen is paying the price for the Bank of Japan’s ultra-easy stance. Until the bank shifts, a sustained rally is very difficult.

It’s all about the tie.

It’s all about the tie.

Photographer: Nishi Yoshitaka/The Yomiuri Shimbun/Bloomberg

No sooner had Bank of Japan Governor Haruhiko Kuroda finished insisting that ultra-easy money was here to stay than authorities swept in to mop up the damage. If there was ever any doubt that the primary cause of the yen's collapse this year was the BOJ's prolonged easing in the face of interest-rate hikes pretty much everywhere else, it was wiped away Thursday.

The Ministry of Finance, which directs Japan's currency policy, intervened to boost the beleaguered yen for the first time in decades. The purchases strengthened the yen through 141 per dollar; the currency had earlier weakened past 145, the cheapest it had been since the Asian financial crisis of the late 1990s. Kuroda had barely left the BOJ press room, where he defended the board's decision to keep monetary settings unchanged. That is rates in negative territory, commitment to harness bond yields near zero and forward guidance that countenances further easing. All this despite inflation that's well above the target of 2%.