Tetsushi Kajimoto
TOKYO (Reuters) – Japanese authorities spent 9.79 trillion yen ($62.23 billion) on foreign exchange market interventions to support the yen over the past month, taking measures that prevented the currency from testing new lows but are unlikely to reverse a long-term decrease.
Treasury data released Friday confirmed traders’ and analysts’ suspicions that Tokyo entered the market in two rounds of massive dollar-selling intervention shortly after the yen hit a 34-year low of 160.245 per dollar on April 29 and then again in the early hours of May 2 in Tokyo.
“It was larger than expected, underscoring Japan’s determination to ease the pain of imported inflation,” said Daisaku Ueno, chief currency strategist at Mitsubishi UFJ (NYSE:) Morgan Stanley Securities.
“Authorities will likely continue to spend heavily on interventions.”
Despite spending billions of dollars in foreign reserves, the effect was not sustainable and market attention has turned to whether and how soon Japan can re-enter the market as the yen weakens near the 160 threshold widely seen as the authorities’ line. in sand for intervention. The yen was trading at 157.235 to the dollar as of 1020 GMT on Friday.
Earlier in the day, Finance Minister Shunichi Suzuki issued a fresh warning of intervention, reiterating that officials were closely monitoring currency markets and were ready to take any necessary measures.
Authorities have refrained from commenting on whether they have intervened in the market, but have consistently warned that they are ready to act at any time to counter excessive volatility.
Friday’s monthly data only shows the total amount Tokyo spent on currency interventions during that period. A more detailed daily breakdown of interventions will only be seen in data for the April to June quarter, which is likely to be released in early August.
Much of the yen’s troubles stem from the strength of the US economy and the resulting delay in Federal Reserve rate cuts, while the Bank of Japan (BOJ) is expected to be in no rush to raise interest rates this year.
Last week, Japan renewed efforts to counter the yen’s excessive fall during a weekend meeting of Group of Seven (G7) financial leaders, fueled by another warning from the group about excessive currency volatility.
“Given the lack of opposition from other countries, Japan will likely continue efforts to contain the excessive fall of the yen through intervention,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.
But US Treasury Secretary Janet Yellen said last week that intervention should be limited to “exceptional” cases, underlining her “faith” in market exchange rates.
Chief currency diplomat Masato Kanda said last week that authorities were ready to take action “at any time” to counter the yen’s excessive movements.
Having taken part in the previous yen-selling intervention more than two decades ago, Kanda, now undersecretary of the Treasury for international affairs, led the yen-buying operations in September and October 2022, spending about 9.2 trillion yen in three days.
While Japan has had limited success in containing the yen’s wild swings, there is a good chance it could act again even if the currency doesn’t break above 160 to the dollar, said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
“Japan must have secured support from the G7, including the US, to intervene in the foreign exchange market again,” he said. “If the yen makes a sharp one-day move from its current level to, say, 158 yen or higher, it could start to act again.”
($1 = 157.3200 yen)