By Kevin Buckland
TOKYO (Reuters) – Japanese authorities spent 5.53 trillion yen ($36.8 billion) intervening in the foreign exchange market this month to lift the yen from a 38-year low, official data showed on Wednesday.
The Finance Ministry figures confirmed the doubts of traders and analysts following the sharp rise in the value of the yen on July 11 and 12, with financial market estimates indicating its value reached 5.71 trillion yen.
Over the two days from July 11, the yen jumped from a low of 161.76 against the dollar to a high of 157.30.
Wednesday’s data only provides the total for the period from June 27 to July 29. A daily breakdown will be available in quarterly data due in about three months.
The finance ministry’s latest move differed from other recent rounds of intervention — including a record 9.79 trillion yen intervention from late April to early May — because officials bought yen at a time when the dollar was already weakening after a surprisingly weak reading of U.S. consumer price inflation.
However, analysts pointed to factors other than the dollar sell-off in Tokyo that could keep the yen higher throughout this month.
The dollar fell again after Republican presidential candidate Donald Trump said he wanted a weaker currency. A number of prominent Japanese politicians, including the prime minister, quickly followed suit, urging the Bank of Japan to raise interest rates in the near term to curb the yen’s weakness.
The Bank of Japan’s decision to raise interest rates earlier on Wednesday and a hawkish press conference by Governor Kazuo Ueda afterwards sent the dollar tumbling to the 150-yen level. The dollar was trading at 150.37 yen by 1039 GMT.
“I’m not saying the intervention didn’t have an impact. It did,” said Shoki Omori, chief strategist on the Japan desk at Mizuho Securities. “But if Trump and others hadn’t come out and said what they said, we might have been back to around 160.”
Despite growing expectations of further BOJ policy normalization, Omori says he expects the yen to weaken again in August.
“Just raising interest rates by 25 basis points does not necessarily reduce the attractiveness of carry trades,” he said, referring to a practice in which market players borrow yen at near-zero interest rates in Japan and invest it in higher-yielding assets abroad, including the United States.
Japanese authorities have traditionally refrained from confirming intervention, while constantly warning that they are ready to act at any time to counter unilateral speculative moves in the currency.
But Tokyo still has plenty of firepower to move again, with foreign reserves at $1.23 trillion at the end of June, and a weak yen remains unpopular with the public and could play a major role in the ruling party’s leadership election in September.
But more intervention is expected under new leadership, with Masato Kanda’s tenure as Japan’s top currency diplomat ending on Tuesday. Financial regulation expert Atsushi Mimura has taken over as vice finance minister for international affairs, and said in an interview that intervention remains on the table.
(1 dollar = 150.4200 yen)