Foreign exchange market intervention and expectations: The yen/dollar exchange rate

Using press reports and official statistics on central bank intervention in conjunction with options market data, we find that central bank intervention had no statistically significant systematic impact on the mean or higher moments of the exchange rate during 1993-2000. We also find that Japanese authorities appeared to intervene mainly in response to deviations of the exchange rate from some implicit target levels and to a rise in market uncertainty. U.S. monetary authorities intervened only in cooperation with the Japanese authorities.