Japanese Foreign Exchange Interventions, 1971-2018: Estimating a Reaction Function Using the Best Proxy
We analyze the history of Japanese foreign exchange interventions from 1971 to 2018. First, we provide the best proxy for monthly interventions for the period from 1971 to 1990, when the intervention timings and amounts were not officially disclosed. The accuracy of the proxy is tested for the period when the statistics were disclosed after 1991. The proxy explains 99.8% of actual settlement-based interventions. Second, we examine conditions under which the Japanese monetary authorities are likely to intervene by estimating a policy reaction function, using the long-term data, spanning the period when intervention data have been officially disclosed and the period where our proxy is available. Third, we analyze intervention timings and amounts for Japan, the US, and Germany. Fourth, we present the episode of international coordination represented by the Plaza and Louvre agreements as a case study of notable interventions during the period.
The first author gratefully acknowledges financial support from the JSPS through Grants-in-Aid for Scientific Research (17H00995). Yabu gratefully acknowledges financial support from the JSPS through Grants-in-Aid for Scientific Research (No. 17K03663). The authors are solely responsible for any remaining errors. The views and opinions expressed in this paper are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
"I serve as a non-resident Board of Director in a company that owns and operate an proprietary trading system; and a financial holding company owning a bank, a life and non-life insurance companies in Japan; also as an advisory board member of an alternative asset manager company and serve as a Editorial Board member of newsletter on Japanese Economy."
Takatoshi Ito & Tomoyoshi Yabu, 2020. "Japanese Foreign Exchange Interventions, 1971-2018: Estimating a Reaction Function Using the Best Proxy," Journal of the Japanese and International Economies, vol 58. citation courtesy of