Did the Joint Currency Intervention for a Weaker Yen Succeed?

Japan’s triple whammy calamity, last March, pushed the yen to the stratosphere. This prompted global finance ministers to jointly intervene in the currency markets to stem its rise.

This from UK’s Guardian.co.uk last March, (highlights mine)

Finance ministers and central bankers from the world's developed nations decided late on Thursday night to send a firm message to financial markets that they would not stand by and watch the yen continue to strengthen

The Bank of Japan began selling yen overnight to depress its value. Other central banks are expected to follow suit as their markets open through today, in a rare concerted move.

The intervention signified as war against speculators: central banks versus speculators.

Over a month since the intervention, the New York Federal disclosed yesterday its participation in the joint action:

The U.S. monetary authorities intervened in the foreign exchange markets on one occasion during the first quarter, on March 18, buying $1 billion against Japanese yen, the Federal Reserve Bank of New York said today in its quarterly report to the U.S. Congress.

During the three months that ended March 31, the dollar depreciated 5.5 percent against the euro but appreciated 2.5 percent against the Japanese yen. In this period, the dollar’s trade-weighted exchange value depreciated 3.7 percent as measured by the Federal Reserve Board’s major currencies index.

The coordinated G-7 intervention was carried out by the foreign exchange trading desk at the New York Fed, operating in conjunction with Japanese monetary authorities, the European Central Bank (ECB) and the monetary authorities of, Canada and the United Kingdom. The intervention amount was split evenly between the Federal Reserve System Open Market Account and the U.S. Treasury’s Exchange Stabilization Fund (ESF).

The blue arrow marks the date when the US government (US Federal Reserve and the Treasury) intervened along with central banks of other nations in a grand scale of collaboration against speculators.

Over the short term, the intervention proved to be a success; the yen weakened.

Today, the yen is seen back at the level where the global governments intervened. In short, billions of dollars of taxpayers money went down the drain.

Bottom line:

Interventions did have immediate effects (which resonates with today’s war against commodities). However, eventually the effects wear out.

Yet who bears the losses from such interventions? Obviously taxpayers!

The battle was won by the central banks in March, but they appear to be losing the war.