Kevin Buckland
TOKYO (Reuters) – Japanese officials may have spent about 3.66 trillion yen ($23.59 billion) on Wednesday in the latest attempt to bring the yen back from nearly 34-year lows, Bank of Japan data showed on Thursday.
Japan’s Finance Ministry may have spent about 6 trillion yen on market interventions on Monday to support the Japanese currency after it fell to 160.245 per dollar for the first time since April 1990, data showed.
On Wednesday, the yen was trading at 157.55 per dollar when it suddenly rose, strengthening to 153 over the next half hour.
The Treasury Department has each time refused to say whether it is behind the yen rally or not, only repeating its readiness to intervene at any moment to stop the disorderly behavior.
Foreign exchange transactions take two business days to clear, and Japanese markets are closed for the May 6 and 7 holidays.
The central bank’s forecast for money market conditions as of May 8 points to net inflows of 4.36 trillion yen, compared with a money market brokerage estimate of 700-1.1 trillion yen that excludes intervention.
“This is a very large amount in a short period of time,” said Shoki Omori, chief strategist at Mizuho Securities Japan, referring to two rounds of apparent intervention this week.
“Now that the Treasury has spent about 9 trillion yen, it will be harder for it to intervene if U.S. jobs or other data comes out strong,” adding further impetus to dollar buying, he said. “The Treasury is backed into a corner.”
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Despite the yen’s sudden surge, it remains about 10% lower against the dollar this year and last changed hands at 155.22.
The speed with which the yen resumed its decline despite such large-scale buying shows how difficult it is to stop the downward momentum.
Analysts point to the huge gap between Japanese and US government debt yields as a reason for the yen’s fall.
Even after the Bank of Japan raised interest rates in March for the first time since 2007, policymakers have signaled they would be slow to tighten further, leaving long-term Japanese government bond yields well below 1%.
Treasury yields are approaching 5% as a strong economy and persistent inflation force markets to trim their bets on Federal Reserve rate cuts.
Fed Chairman Jerome Powell reiterated that idea on Wednesday when he reiterated that it will “take longer than previously expected” for policymakers to realize that inflation will resume its decline toward its 2% target.
($1 = 155.1400 yen)