Over the course of the last month, Japanese officials intervened in the foreign exchange market to strengthen the yen, spending 9.79 trillion yen ($62.23 billion). While these actions prevented the currency from falling further, they are unlikely to stop longer-term falls.

The data released by the Ministry of Finance on Friday validated the conjectures held by traders and analysts that Tokyo intervened heavily in the market twice, selling dollars in two rounds, soon after the yen fell to a 34-year low of 160.245 per dollar on April 29 and again in the early hours of May 2 in Tokyo.

Chief FX analyst at Mitsubishi UFJ Morgan Stanley Securities Daisaku Ueno stated, “This was larger than expected, underscoring Japan’s resolve to ease the pain of imported inflation.”

“Authorities will likely continue to spend big on intervention.”

The effect has not persisted despite the billions of dollars spent on foreign reserves, and as the yen lingers close to the 160 mark—which is commonly regarded as the line in the sand for authorities to intervene—market focus has shifted to whether and when Japan might enter the market once more. As of Friday at 10:20 GMT, the value of the yen was 157.235 per dollar.

Earlier in the day, Finance Minister Shunichi Suzuki said that authorities are keeping a close eye on the currency markets and are prepared to take any necessary action. This was a fresh intervention warning.

Authorities have often stated they are prepared to move at any time to offset excessive volatility, but they have refrained from commenting on whether they entered the market.

The monthly data set released on Friday simply displays Tokyo’s total outlay for currency intervention at that time. Data for the April–June quarter, which is anticipated to be released in early August, will be the only ones that display a more thorough daily breakdown of intervention.

The strength of the US economy and the consequent postponement of Federal Reserve rate reduction are mostly to blame for the yen’s problems, since the Bank of Japan (BOJ) is anticipated to raise interest rates gradually this year.

During a weekend meeting of Group of Seven (G7) finance leaders last week, Japan stepped up its efforts to counteract large yen declines, aided by the group’s repeated warnings against excessive currency volatility.

“Given that there was no opposition from other countries, Japan will likely continue efforts to curb excessive yen falls through intervention,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

But this week, U.S. Treasury Secretary Janet Yellen stated that intervention should only be used in “exceptional” circumstances, highlighting her “belief” in the currency rates determined by the market.

Leading currency diplomat Masato Kanda declared last week that the government is ready to intervene “anytime” to stop unwarranted yen movements.

Kanda, who is currently the vice finance minister for foreign affairs, oversaw yen-buying operations in September and October of 2022, spending around 9.2 trillion yen over the course of three days. Kanda had previously participated in yen-selling intervention more than two decades prior.

As noted by Masafumi Yamamoto, chief FX analyst at Mizuho Securities, “even if the currency does not break beyond the 160-to-the-dollar mark, there’s a good chance it could act again.” Japan has had only patchy success in containing large yen movements.

“Japan must have won backing from G7 including the U.S. to intervene in the currency market again,” he said. “If the yen makes sharp single-day moves from the current level to say, 158 yen or beyond, it might take action again.”

(Adapted from Reuters.com)

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