The Japanese government wants a stronger Yen (JPY). It seems pretty clear that the Japanese Ministry of Finance (MOF) has intervened several times in recent days to support the JPY. At the same time, there is a high probability (even this morning!) that a future US government would want to see a weak US Dollar (USD), notes Commerzbank FX Strategist Ulrich Leuchtmann.
Possible policy coordination between the Fed and the MoF
“This is a rare case where governments on both sides of the USD/JPY pair agree on the direction in which they would like the market outcome to change. In technical jargon, this is called ‘international policy coordination’, although that word could literally be understood in many ways. Economists refer to this as “international policy coordination.”
“The great example of international policy coordination is the Plaza Accord, the agreement of the finance ministers and central bank governors of the G5 (US, Japan, Germany, France, UK) who met at the Plaza Hotel in New York on 22 September 1985 and agreed to weaken the US dollar against the other four currencies by intervention. This was followed by a Louvre Accord of the G6 (including Canada) when they had to decide that devaluation of the USD should suffice.”
“Whether this was or not, economists have come to the conclusion that international policy coordination is a bad idea. But I now fear that each generation repeats the mistakes of the past, because they only learn from their own failures and do not draw lessons from the experiences of their elders. That is why I do not want to rule out the possibility that there may be a repeat of ‘Plaza 1985’ after 40 years.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
