Why Japan's $70 billion-plus intervention and a rate hike didn't prop up the yen more

The yen rose on Monday, helped by comments from Bank of Japan Governor Kazuo Ueda who left the door open to a near-term rate hike. Javier Ghersi | Moment | Getty Images Japanese Finance Minister Satsuki Katayama is increasingly finding herself in an unenviable position on the foreign-exchange front. After deploying over 11.7 trillion yen ($72.8 billion) in foreign reserves to prop up the currency from April to May and the Bank of Japan raising policy rates to a more than three-decade high, the yen still languishes at the 160 level against the dollar. Masahiko Loo, senior fixed income strategist at State Street Investment Management, said that the rate hike was widely expected, making it a little more than a "Band-Aid on a bullet wound" for the yen. Furthermore, Japanese officials including Katayama signaled multiple times in early June that Japan was prepared to take "decisive ‌action" against excessive volatility in the yen — ironically, that very signaling helped reduce the element of surprise, and by extension, the effectiveness of any intervention. "Policymakers have telegraphed their warning so clearly that a preemptive strike might only bring fleeting relief," said Loo. On April 30, the yen appreciated sharply to 156.6 from 160.39 against the greenback, prompting speculation that Tokyo had stepped into the market. The currency strengthened to around 155 the following day, only to start weakening again. …