By Tetsushi Kajimoto
TOKYO (Reuters) – Japanese authorities spent 9.79 trillion yen ($62.23 billion) on currency market interventions last month to support the yen, in moves that kept the currency from testing new lows, but it is unlikely to reverse the longer-term declines.
Finance Ministry 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. the early hours of May 2 in Tokyo.
“This was bigger than expected and underlined Japan’s determination to ease the pain of imported inflation,” said Daisaku Ueno, chief currency strategist at Mitsubishi UFJ (NYSE:) Morgan Stanley Securities.
“The authorities will likely continue to spend a lot of money on interventions.”
Despite the billions of dollars of foreign reserves spent, the effect is not permanent and market attention has shifted to whether and how quickly Japan could reenter the market as the yen languishes near the threshold 160, which is generally seen as the authorities’ line. in the sand for intervention. The yen was trading at 157.235 per dollar at 1020 GMT on Friday.
Finance Minister Shunichi Suzuki issued a new intervention warning earlier in the day, reiterating that officials are closely monitoring currency markets and ready to take any necessary measures.
Authorities have refrained from commenting on whether they have entered the market, but have consistently warned that they are ready to act at any time to counter excessive volatility.
Friday’s monthly data set only shows the total amount Tokyo spent on currency intervention during the period. A more detailed daily breakdown of interventions will only be seen in the data for the April-June quarter, which is likely to be released in early August.
Much of the yen’s troubles stem from the resilience of the US economy and the resulting delay in Federal Reserve rate cuts, while the Bank of Japan (BOJ) is expected to take its time this year increase interest rates.
Last week, Japan renewed its efforts to stem excessive falls in the yen at a weekend meeting of Group of Seven (G7) financial leaders, with the group again warning of excessive currency volatility.
“Given that there was no opposition from other countries, Japan is likely to continue its efforts to curb the yen’s excessive decline through intervention,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.
However, US Treasury Secretary Janet Yellen said last week that interventions should be limited to “exceptional” cases, underscoring her “faith” in market-set exchange rates.
Top currency diplomat Masato Kanda said last week that authorities were ready to take action at “any time” to counter excessive yen movements.
After being involved in the previous yen selling intervention more than two decades ago, Kanda, now the Vice Minister of Finance for International Affairs, led the yen buying operations in September and October 2022, selling approximately 9.2 in three days trillion yen.
While Japan has had only limited success in cushioning sharp swings in the yen, it is likely to take action again even if the currency does not break past the $160 per dollar barrier, says Masafumi Yamamoto, head FX Strategist at Mizuho Securities.
“Japan must have received support from the G7, including the US, to intervene again in the foreign exchange market,” he said. “If the yen makes sharp moves from current levels to, say, 158 yen or higher in one day, it could take action again.”
($1 = 157.3200 yen)
