The Japanese yen jumped on Thursday after monetary authorities intervened in the foreign exchange market to strengthen the beaten currency for the first time since 1998, although analysts said Japan could face difficulties in holding the yen for a long time.

 

The dollar last fell 1.1% to 142.40 yen. After the intervention, it hit a low of 140.31 yen, having previously reached a new 24-year peak of 145.9 yen. The spread between the high and low of the day for the pair was the widest since June 2016.

 

The euro, the Australian dollar and the pound sterling also fell against the Japanese currency, but then recovered slightly.

 

"We have taken decisive action," Masato Kanda, Japan's deputy finance minister for international affairs, told reporters, answering in the affirmative when asked whether this meant intervention.

 

Confirmation of the intervention came just hours after the Bank of Japan decided to keep interest rates low to support the country's fragile economic recovery.

 

Bank of Japan Governor Haruhiko Kuroda told reporters that the central bank could refrain from raising rates or changing its dovish political leadership for several years.

 

By contrast, central banks around the world, most notably the U.S. Federal Reserve, are actively raising rates, and this policy divergence puts pressure on the yen.

 

However, according to analysts, Japan cannot continue to support the currency on a permanent basis.

 

"In the next three to six months, and maybe longer, as long as these monetary policy divergences persist and these differences persist, you will continue to see the yen weaken," said Brendan McKenna, international economist and currency strategist at Wells Fargo Securities.

 

"U.S. yields are up nearly six basis points or so today, while yields in Japan are down. Therefore, I think that the spread should continue to favor the US dollar, and this is what will lead to a weakening of the yen until the end of this year and possibly in early 2023," he added.