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Japan deployed $74 billion in currency intervention to support the yen, but analysts say the trade is structurally compromised as long as U.S.-Japan interest rate differentials continue to favor the dollar.
The scale of the outlay underscores Tokyo's commitment — the difficulty is that the arithmetic still works against it. Intervention Without Rate Convergence Currency intervention buys time, not direction.
With the Federal Reserve holding rates materially above those in Japan, capital flows have a persistent reason to favor dollar-denominated assets. Analysts noted that the wide differential between U.S.
and Japanese rates continues to support the dollar, meaning any yen recovery purchased with reserves is susceptible to reversal as soon as official buying stops.
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