In the spring of 2002, the Japanese Ministry of Finance intervened in the foreign exchange market by selling yen and purchasing dollars. Why? And why did the intervention fail?

What will be an ideal response?


The attempt was to try to bring about a depreciation of the yen relative to the dollar to boost Japanese export industries and help to stimulate a stagnant Japanese economy. The intervention failed because as the Ministry of Finance was selling yen, the Bank of Japan (Japan's central bank) in conducting monetary policy was buying them.

Economics

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