By Kevin Buckland
TOKYO (Reuters) – Japanese officials may have spent as much as 3.66 trillion yen ($23.59 billion) on Wednesday in the latest effort to pull the yen back from near 34-year lows, Bank data showed on Thursday or Japan.
Japan’s finance ministry may have spent about 6 trillion yen on market interventions on Monday to prop up Japan’s currency after it fell to 160.245 per dollar for the first time since April 1990, data showed.
On Wednesday, the yen was trading around 157.55 per dollar when it suddenly spiked, rising to 153 over the next half hour.
The Treasury Department each declined to say whether or not it was behind the yen’s rallies, merely reiterating its willingness to intervene at any time to halt disorderly movements.
Currency transactions take two business days to clear, and Japanese markets are closed on May 6 and 7 for public holidays.
The central bank’s projection for money market conditions on May 8 points to a net receipt of funds of 4.36 trillion yen, compared with an estimate of 700 billion to 1.1 trillion yen from money market brokers that excludes intervention.
“This is a very large amount in a short time,” said Shoki Omori, chief Japan strategist at Mizuho Securities, referring to the two rounds of apparent intervention this week.
“Now that the Treasury Department has spent roughly 9 trillion yen, it will become less easy for them to intervene if U.S. payrolls or other numbers go down,” he said. “MOF is being pushed into a corner.”
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Despite the yen’s sudden steep rallies, it remains down about 10% against the dollar this year, last changing hands at 155.22.
The speed at which the yen has resumed its decline despite such large-scale buying shows how difficult it is to halt the downward momentum.
Analysts point to the yawning gap between Japanese and US government bond yields as the force behind the yen’s decline.
Even after the Bank of Japan raised rates in March for the first time since 2007, policymakers have signaled a slow approach to further tightening, keeping long-term Japanese government bond yields well below 1%.
Equivalent government bond yields have risen toward 5% as a robust economy and persistent inflation forced markets to scale back their bets on Federal Reserve rate cuts.
Fed Chairman Jerome Powell reinforced that idea Wednesday when he reiterated that it will take “longer than previously expected” for policymakers to gain confidence that inflation will return to their 2% target.
($1 = 155.1400 yen)
