Reforming Japan’s Foreign Exchange Policy

Masanaga Kumakura

Published: March 2012

Among major advanced countries Japan stands out with its large-scale, one-sided exchange market interventions and enormous foreign exchange reserves. While the country’s exchange market activism is often attributed to its obsession with export-led growth, there are institutional reasons why such a policy remains unchecked. This paper discusses the problems of Japan’s Foreign Exchange Fund Special Account, their relationship with its exchange rate policy, and their implication for the international financial system.