Japan Likely Spent About $34.5 Billion on Yen Intervention

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Japan Likely Spent About $34.5 Billion on Yen Intervention.

foreign exchange :: 1day ago :: source - bloomberg

By Toru Fujioka

(Bloomberg) -- Japan likely spent around $34.5 billion Thursday in its first currency intervention to prop up the yen since July 2024, according to a Bloomberg analysis of central bank accounts.

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The scale of intervention was probably around ¥5.4 trillion, based on a comparison of Bank of Japan accounts released Friday and money broker forecasts. In 2024, authorities spent an average of ¥3.8 trillion on four occasions to support the yen.

This was the first intervention under the direction of Finance Minister Satsuki Katayama and the first since Sanae Takaichi became prime minister. The scale and impact indicate that the broad boundaries of Japan’s threshold for an acceptable level of yen weakness remain largely unchanged under Takaichi’s leadership.

The yen strengthened sharply on Thursday after hitting 160.72 against the dollar earlier in the day, its weakest level since mid-2024. While Atsushi Mimura, the nation’s top currency official, declined to comment on whether Japan had entered the market earlier Friday, a person familiar with the matter told Bloomberg that authorities had done so.

“I would say the intervention was effective as it brought the yen down to around 155 per dollar. But I don’t think they are out of woods yet,” said Takahide Kiuchi, executive economist at Nomura Research Institute and a former BOJ board member.

The yen was trading at around 156.59 per dollar Friday evening in Tokyo, having pared some of the gains. With the market gripped by high volatility of late, Katayama and Mimura are staying on high alert for speculative moves.

Katayama warned traders on Thursday that it was best not put their cellphones down during the Golden Week holiday period in Japan, which are set to continue through Wednesday.

Thursday’s move was reminiscent of intervention two years ago, also at the start of Japan’s Golden Week. On that occasion, Japan spent a record ¥5.92 trillion to prop up the yen in its first move, followed by a smaller intervention to reinforce the impact. The second entry took the yen down to the 153 range against the dollar.

Friday’s central bank data showed it expects its current account to fall by ¥9.48 trillion due to fiscal factors on Thursday next week, the first business day after the Golden Week holidays. That was a much bigger decline than the roughly ¥4.08 trillion estimated by money brokers at Tokyo Tanshi, Central Tanshi and Ueda Yagi Tanshi.

Speaking to reporters earlier Friday, Mimura also indicated a readiness to intervene in the crude oil futures market too if needed.

Brent crude futures declined as the yen strengthened Thursday, though it remains unclear whether the moves were linked or whether the ministry intervened. Japanese officials have repeatedly pointed to speculative activity in oil futures as a factor exacerbating the yen’s weakness.

If Japan also entered the oil market, the overall size of their intervention on Thursday would likely be larger than ¥5.4 trillion. But for now, the main concern among traders is whether the authorities will repeat with a follow-up move like they did two years ago.

“They could even intervene again during this Golden Week,” said Kiuchi. “This intervention exhibits their determination to defend the 160 line at all costs.”

--With assistance from Issei Hazama, Go Onomitsu and Molly Smith.

(Adds economist comment.)