Korean and Japanese forex authorities have intensified market interventions and coordination signals, causing USD-KRW and USD-JPY exchange rates to retreat from recent highs. On July 10, Korean Vice Finance Minister Moon Ji-seong's verbal intervention drove USD-KRW from an intraday peak of 1,513.50 won down to 1,499.30 won, while Japanese Finance Minister Katayama Satsuki's announcement on expanding domestic pension fund investments triggered a 1-yen drop in USD-JPY. The coordinated messaging follows a three-week pattern of Korean smoothing operations every Friday, with authorities citing persistent divergence between exchange rates and economic fundamentals as the rationale for intervention.
Korean Authority Conducts Verbal Intervention on July 10
USD-KRW rose to 1,513.50 won at 10:41 AM on July 10 before Vice Finance Minister Moon Ji-seong issued statements on exchange rate policy. The rate fell to the 1,501 won level by 11:20 AM, then declined further to an intraday low of 1,499.30 won at 3:19 PM. Moon stated that "the current exchange rate still has a gap with economic fundamentals" and expressed expectation that "supply and demand conditions will gradually change to reflect fundamentals in the second half." He added that "forward exchange sales by exporters are expected to increase further going forward." Moon disclosed that a joint inspection by the Bank of Korea and Financial Supervisory Service is in its final stages, with corrective measures to be prepared if problems are found. He noted that forex market manipulation has decreased recently and that the authorities are reviewing response measures for false quote submissions.
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Japanese Finance Minister Announces Pension Fund Policy Shift
Japanese Finance Minister Katayama Satsuki stated on July 10 that the government will support expanding domestic financial asset investments by public pension funds including the Government Pension Investment Fund (GPIF). Markets interpreted the announcement as a signal to reduce overseas asset allocations and favor yen-denominated assets, triggering yen buying that pushed USD-JPY down by approximately 1 yen. Japan's Ministry of Finance previously disclosed conducting 11.7349 trillion yen in forex market interventions between April 28 and May 27 when USD-JPY exceeded 160 yen. The intervention marked the first yen-buying operation in 1 year and 9 months since July 2024 and represented the largest intervention during a yen-weakening phase on record.
Market Participants Detect Coordinated Intervention Pattern
A commercial bank forex dealer noted that "recently when USD-JPY falls, USD-KRW also declines together, though afterwards USD-KRW often rises again due to domestic supply-demand factors." The dealer added that "the July 10 drop in USD-JPY following the Japanese Finance Minister's remarks was different from previous verbal interventions, so the market estimates actual intervention also occurred." Another foreign bank forex dealer stated that "with strong messages coming out repeatedly, the market has formed an atmosphere of being cautious about the upper range on Fridays," adding that "the perception that Korea and Japan are moving together is gradually strengthening." Market participants observed that for three consecutive Fridays, Korean authorities have shown responses, creating a pattern that traders now anticipate. One dealer noted that "whereas previously many would build long positions on Fridays, now the psychology of being wary of authorities has strengthened."
Authorities Publicly Confirm Cooperation Framework
At the Korea Investment Corporation (KIC) Tokyo office opening ceremony held in Tokyo on July 7, Japanese Vice Finance Minister for International Affairs Mimura Atsushi stated that "we have been in particularly close contact with our Korean counterparts regarding recent market trends including the forex market, and will continue this cooperation going forward." Vice Finance Minister Moon also indicated continued close communication, saying that "many opportunities for consultations among Korea-US-Japan forex authorities are scheduled ahead."
FAQ
What did Korean authorities do on July 10 to affect USD-KRW?
Vice Finance Minister Moon Ji-seong issued verbal intervention statements on July 10 that caused USD-KRW to fall from an intraday high of 1,513.50 won to a low of 1,499.30 won. Moon stated the exchange rate has a gap with economic fundamentals and disclosed that a joint Bank of Korea and Financial Supervisory Service inspection is in final stages.
How much did Japan intervene in forex markets between April 28 and May 27?
Japan's Ministry of Finance disclosed conducting 11.7349 trillion yen in forex market interventions between April 28 and May 27 when USD-JPY exceeded 160 yen. This represented the largest intervention during a yen-weakening phase on record and the first yen-buying operation in 1 year and 9 months since July 2024.
What cooperation framework exists between Korean and Japanese forex authorities?
Japanese Vice Finance Minister Mimura Atsushi stated on July 7 that authorities have been in particularly close contact with Korean counterparts regarding forex market trends and will continue this cooperation. Korean Vice Finance Minister Moon indicated many Korea-US-Japan forex authority consultations are scheduled ahead.
