The accuracy of reports of foreign exchange intervention by the Bank of Japan: Does Tokyo know more?

This paper examines the accuracy of press reports of foreign exchange intervention by the Bank of Japan. We investigate whether the local news wire (JiJi News) reacted differently from the foreign press (Wall Street Journal) between January 2000 and December 2003. Our results show that the likelihood of intervention being reported given that it actually occurred is higher for the JiJi News than for the Wall Street Journal, but the JiJi News has many more instances of false speculative intervention reports. As such, the underreporting by the Wall Street Journal mitigates its overall errors as compared to the JiJi News. We find that the change of Japan's intervention strategy from the beginning of 2003 has a major impact on the accuracy of press reports. Logit analysis also demonstrates that the likelihood of intervention being firmly reported increased with the size of the intervention and the magnitude of appreciation of the Japanese yen.