Written by Kevin Buckland
TOKYO (Reuters) – Japanese officials may have spent about 3.66 trillion yen ($23.59 billion) on Wednesday in the latest attempt to pull the yen back from its lowest levels in nearly 34 years, Bank of Japan data showed on Thursday.
The data showed that the Japanese Ministry of Finance may have spent about 6 trillion yen to intervene in the market on Monday to support the Japanese currency after it fell to 160.245 to the dollar for the first time since April 1990.
On Wednesday, the yen was trading at around 157.55 yen to the dollar when it suddenly rose, rising to 153 over the next half hour.
The Ministry of Finance refused each time to disclose whether it was behind the yen's rise or not, and only repeated its readiness to intervene at any time to stop the uncontrolled movements.
Currency trades take two business days to settle, and Japanese markets are closed on public holidays on May 6 and 7.
The central bank's forecast for money market conditions on May 8 indicates net funds received of 4.36 trillion yen, compared to estimates of between 700 billion and 1.1 trillion yen from money market brokerages that exclude intervention.
“This is a very large amount in a short period of time,” said Shoki Omori, chief Japan strategist at Mizuho Securities, referring to two rounds of apparent intervention this week.
“Now that the Finance Ministry has spent nearly 9 trillion yen, it will be easier for them to intervene if US employment or other data comes in strong,” he said, providing more impetus to buy the dollar. “The Ministry of Finance is being pushed into a corner.”
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Despite the yen's sudden sharp rises, it has remained down about 10% against the dollar so far this year, last trading at 155.22.
The speed with which the yen resumed its decline despite widespread buying shows how difficult it is to stop downward momentum.
Analysts point to the huge gap between Japanese and US government debt yields as the force behind the yen's decline.
Even after the Bank of Japan raised interest rates for the first time since 2007 in March, policymakers signaled a slow approach to further tightening, keeping long-term Japanese government bond yields well below 1%.
Equivalent Treasury yields are trending toward 5%, as a strong economy and stubborn inflation force markets to scale back their bets on interest rate cuts from the Federal Reserve.
Federal Reserve Chair Jerome Powell reinforced that idea on Wednesday when he reiterated that it “will take longer than previously expected” for policymakers to feel comfortable that inflation will resume falling toward its 2% target.
($1 = 155.1400 yen)
