
Contents
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6.1. Introduction 6.1. Introduction
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6.2. An Overview of Foreign Exchange Intervention in Japan 6.2. An Overview of Foreign Exchange Intervention in Japan
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6.2.1. The Legal Framework 6.2.1. The Legal Framework
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6.2.2. The Frequency and Scale of Intervention 6.2.2. The Frequency and Scale of Intervention
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6.2.3. The Characteristics of Intervention 6.2.3. The Characteristics of Intervention
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6.2.4. The Monetary Consequence of Intervention 6.2.4. The Monetary Consequence of Intervention
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6.3. Intervention to Lean Against the Wind: 1991–2000 6.3. Intervention to Lean Against the Wind: 1991–2000
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6.3.1. Determinants of Intervention Decisions 6.3.1. Determinants of Intervention Decisions
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6.3.2. Attempts to Stem the Tide of Yen Appreciation: 1994–5 6.3.2. Attempts to Stem the Tide of Yen Appreciation: 1994–5
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6.3.3. Stemming the Free Fall of the Yen: 1998 6.3.3. Stemming the Free Fall of the Yen: 1998
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6.4. Foreign Exchange Intervention and Monetary Policy: 2001–4 6.4. Foreign Exchange Intervention and Monetary Policy: 2001–4
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6.4.1. Quantitative Easing Monetary Policy 6.4.1. Quantitative Easing Monetary Policy
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6.4.2. Intervention and Monetary Policy Decisions 6.4.2. Intervention and Monetary Policy Decisions
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6.5. A New Manner of Intervening in the Foreign Exchange Market: 2010–11 6.5. A New Manner of Intervening in the Foreign Exchange Market: 2010–11
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6.5.1. Structural Changes in Japan’s External Sector 6.5.1. Structural Changes in Japan’s External Sector
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6.5.2. Monetary Policy Actions after the Global Financial Crisis 6.5.2. Monetary Policy Actions after the Global Financial Crisis
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6.5.3. Decisive Actions to Calm the Disorderly Markets 6.5.3. Decisive Actions to Calm the Disorderly Markets
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6.6. The Channels of Intervention Effectiveness 6.6. The Channels of Intervention Effectiveness
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6.6.1. Effectiveness in Influencing Daily Exchange Rate Returns 6.6.1. Effectiveness in Influencing Daily Exchange Rate Returns
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6.6.2. Impact on Daily Exchange Rate Volatility 6.6.2. Impact on Daily Exchange Rate Volatility
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6.6.3. The Portfolio Balance and Signaling Channels 6.6.3. The Portfolio Balance and Signaling Channels
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6.6.4. The Microstructure Channel 6.6.4. The Microstructure Channel
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6 Foreign Exchange Market Intervention: 1991–2011
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Published:April 2015
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Abstract
Chapter 6 reviews Japan’s official foreign exchange market intervention, which became virtually the only standard tool of managing the exchange rate. After presenting an overview of the institutional and political economy aspects of intervention, the chapter explains how and why authorities intervened and discusses the external and domestic contexts within which intervention decisions were made. By drawing on the large empirical literature that has emerged on Japanese intervention, it assesses whether intervention was effective in influencing the exchange rate in a desired direction, while taking note of the high degree of cooperation the central bank and the government displayed during the latest episodes, evidently to enhance the effectiveness of intervention. The concluding section discusses possible channels of intervention effectiveness based on the Japanese experience
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