CITIC Securities: The joint intervention by the U.S. and Japan in the foreign exchange market aims to prevent risks stemming from the continuous depreciation of the yen.

CITIC Securities released a research report stating that the joint intervention in the foreign exchange market by the U.S. and Japan aims to prevent risks from the continued depreciation of the yen from spilling over. Japan's main dilemma lies in its domestic inflation remaining persistently below the Bank of Japan's target level, with limited willingness to raise interest rates in monetary policy. Additionally, the high Michihiko Saito cabinet's tax reduction plan may further widen Japan's fiscal gap, undermining investor confidence in yen-denominated assets. On the other hand, the U.S. is concerned that Japan may sell U.S. Treasury bonds to stabilize its exchange rate, which could further push up long-term interest rates against the backdrop of high supply of U.S. bonds. Overall, short-term interventions by the U.S. and Japan in the foreign exchange market are helpful in stabilizing market expectations, but with the interest rate differentials between the two countries still at a high level, there is limited room for the yen to continue appreciating significantly. Compared to the Japanese stock market, U.S. stocks still have more significant advantages in terms of profit growth, industry structure, and the AI supply chain.