The foreign exchange market in Korea is experiencing three important changes in the post-crisis period, which deserve special attentions for their implications on the government exchange rate policy. First, with the adoption of the free floating exchange rate system, exchange rate volatility has increased in the market. Accordingly, ensuring stable exchange rates has emerged as one of the top priorities for the exchange rate policy. The first chapter discusses whether foreign exchange intervention is a useful policy instrument for reducing exchange rate volatility by relying on the Japanese experience. Vocal interven- tions conducted by the Japanese monetary authorities were found to increase the volatility of the yen/dollar exchange rate. It implies that vocal interventions destabilized the yen/dollar exchange market. Unlike vocal interventions, however, actual interventions by the Japanese monetary authorities decreased the exchange rate volatility. These findings therefore suggest that actual interven- tions are a more effective policy instrument than vocal interventions if the objective of the intervention policy is to stabilize the foreign exchange market.