THE JAPANESE yen has risen in the foreign exchange markets to 200 to the dollar. That's a dramatic increase since Sept. 22, when the five largest industrial democracies announced a campaign of intervention in the markets to bring the dollar down. The yen is now getting up close to the exchange rate that reflects its actual value in trade. The dollar was overvalued against the yen by roughly 30 percent when the intervention began two months ago. Now the overvaluation has been brought into the range of 5 to 10 percent.

Amidst the applause and congratulations, the governments of the trading countries now run two kinds of danger. On the American side there's a great temptation -- you can already hear the hints and murmurs -- to say that intervention works and the exchange rates can safely be left to intervention alone. That's a very comfortable idea, for it means that there's no need to take up difficult and unpleasant responsibilities such as reducing the size of the federal budget deficit. But, like many comfortable ideas, it's wrong.

Intervention, after all, only means using government money to buy and sell currencies and move rates by changing supply and demand in the market. Historically, intervention ruled the exchange markets only as long as governments' resources were massively larger than those of private traders and speculators. But the former system of fixed exchange rates collapsed in the early 1970s precisely because of the growth of currency and investment flows beyond levels that governments could outweigh. Trading in the dollar alone now is in the range of $200 billion a day; total U.S. government revenues are a little under $800 billion a year. If the major trading countries want stable rates, they are going to have to bring their basic economic policies into better harmony. For the Americans, that begins with getting the budget deficits under control.

But there's another danger ahead as the exchange rates swing, and this one mainly threatens the Japanese and the Europeans. As the American dollar drops, demand here for Japanese and European imports is going to drop with it. Japan and particularly Germany, which sets the pace for Europe, are reacting very slowly to this reality. The right response is to step up domestic demand. Japan has made some useful moves in that direction, but Germany seems paralyzed -- even though the unemployment rate for Western Europe is now 11 percent and rising.

Foreign exchange rates are a highly abstract dance of numbers on traders' computer screens. But when the rates begin to move, the consequences for jobs and standards of living are altogether real.