An example of indirect intervention by the Bank of Japan would be for the Bank of Japan to use interest rates to increase the value of the yen versus the dollar.

Question

Quizplus · Accepted Answer

Indirect intervention refers to when a central bank uses monetary policy tools, such as interest rates, to influence the exchange rate without directly participating in the foreign exchange market. By increasing interest rates, the demand for a currency may increase, leading to an appreciation in its value relative to other currencies. In this case, the Bank of Japan would be indirectly intervening to increase the value of the yen against the dollar.

An Example of Indirect Intervention by the Bank of Japan