Why the historic U.S.-Japan intervention has failed to halt the yen’s slide

The yen gained on Wednesday following a rally in Japan's equities and bets on more fiscally responsible policies after Prime Minister Takaichi's election win.Yevgen Romanenko | Moment | Getty ImagesThe Japanese yen has erased about half the gains from a historic U.S.-Japan intervention less than two weeks ago, as the fundamental forces that have pressured the currency to multi-decade lows prove increasingly resilient against short-term measures. Japan's currency is currently trading at over 159 per dollar, after having strengthened to 155 in the days following the intervention after it crossed 163."Intervention has scared markets, but has not stopped the laws of finance which say money flows in the direction of maximum returns … as long as the cost of money in Japan is lower than the return overseas, carry trades will re-assert," said Jesper Koll, expert director at Monex Group.Stock Chart IconStock chart iconYen performance year-to-dateAt the heart of the problem is the gap in returns between Japan and the U.S. With Japanese borrowing costs still far below those in the U.S. and other markets, prompting investors to borrow cheaply in yen and invest in higher-yielding assets, also k...