Over the years, there have been numerous exogenous shocks, such as large fluctuations in prices of commodities including crude oil, swings in overseas economies, weakened demand following the consumption tax hikes, multiple natural disasters, and the outbreak of COVID-19. On each occasion, the Bank has made various responses in an innovative and creative manner.
In the end, this episode strengthened Duisenberg in his resolve to defend the exchange rate, even if significant interest hikes were required. By acting like that, Duisenberg quickly restored credibility in the markets, and in the course of that proved that credibility is achieved by action, not by words.