Foreign Currency

Japan likely conducted forex intervention worth around 5 tril. yen

Japan likely spent some 5 trillion yen ($32 billion) on Monday in currency market intervention, data by its central bank and market sources showed Tuesday, in the clearest evidence yet of the nation’s attempt to slow the yen’s rapid fall.

The government has not confirmed that it intervened after the yen on Monday tumbled versus the U.S. dollar beyond the 160 line, a 34-year low, and then jumped to the 154 zone in a short span of time.

The suspected yen-buying, dollar-selling intervention could have been close to the 5.62 trillion yen Japan spent in its foray into the market on Oct. 21, 2022, the biggest ever single-day intervention. Japan conducted three interventions in 2022 totaling nearly 9.2 trillion yen.

The latest number was calculated by looking at the difference between private-sector estimates of the current account balance at the Bank of Japan and that provided by the central bank itself.

Photo taken in July 2023 shows the Bank of Japan headquarters in Tokyo. (Kyodo)

The BOJ releases an estimate of its current account balance on a daily basis, with a final revision reported two business days later. The central bank said Tuesday it estimates a 7.56 trillion yen drop in its current account due to fiscal factors, much larger than the fall of 2.05 trillion to 2.3 trillion yen projected by market sources. The gap could indicate the size of market intervention.

The Finance Ministry is scheduled to release data on currency intervention at the end of May, covering about one month from Friday to May 29.

Despite market views that Japan intervened to slow the yen’s rapid weakening, the country’s top currency diplomat Masato Kanda has not publicly confirmed it.

But he has said the negative blow to people’s livelihoods from the yen’s excessive volatility “cannot be tolerated.”

The dollar traded around the 157 yen line for most of Tuesday as the suspected intervention by Japan kept market participants cautious.

The yen’s drop was accelerated by BOJ chief Kazuo Ueda’s comments last week suggesting that he did not take issue with the currency’s fall.

The interest rate gap between Japan and the United States has been a major driver weakening the yen, since the U.S. Federal Reserve hiked rates aggressively to tame inflation.

The BOJ, which went ahead with its first rate hike in 17 years in March, is expected to stick to its accommodative policy stance for the time being.

Related coverage:

Dollar top-heavy in upper 156 yen range on intervention jitters

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