By Tetsushi Kajimoto
TOKYO (Reuters) – Japanese authorities spent 9.79 trillion yen ($62.23 billion) intervening in the foreign exchange market to support the yen over the past month, moves that prevented the currency from testing new lows but are unlikely to reverse long-term declines.
Finance Ministry data released on 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 to the dollar on April 29, and again on April 29. The early hours of May 2 in Tokyo.
“This was larger than expected, underscoring Japan's determination to ease the pain of imported inflation,” said Daisaku Ueno, chief foreign exchange strategist at Mitsubishi UFJ (NYSE:) Morgan Stanley Securities.
“The authorities are likely to continue to spend large sums of money on intervention.”
Despite spending billions of dollars in foreign reserves, the effect has not lasted, and market attention has turned to whether and when Japan might re-enter the market, with the yen weakening near the 160 yen threshold widely seen as the authorities' line. In the sand to intervene. The yen was trading at 157.235 yen to the dollar by 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 are prepared to take all necessary measures.
The authorities declined to comment on whether they had entered the market or not, but they constantly warned that they were ready to act at any time to confront excessive volatility.
The monthly data set released on Friday only shows the total amount Tokyo spent on currency intervention during the period. A more detailed daily breakdown of the intervention will only appear in data for the April-June quarter, likely to be released in early August.
Much of the yen's woes are due to the resilience of the US economy and the resulting delay in interest rate cuts by the Federal Reserve, while the Bank of Japan is expected to take its time raising interest rates this year.
Last week, Japan renewed its efforts to counter the excessive decline in the yen during a weekend meeting of financial leaders of the Group of Seven (G7), which was helped by the group once again warning against excessive volatility in the currency.
“Given the lack of opposition from other countries, Japan is likely to continue its efforts to limit the excessive decline in the yen through intervention,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.
However, US Treasury Secretary Janet Yellen said last week that intervention should be limited to “exceptional” cases, underscoring her “faith” in market-determined exchange rates.
Masato Kanda, the currency's chief diplomat, said last week that authorities were ready to take action “at any time” to counter excessive yen movements.
Having previously engaged in yen selling intervention more than two decades ago, Kanda, who is now deputy finance minister for international affairs, led yen buying in September and October of 2022, spending about 9.2 trillion yen over a three-day period.
Masafumi Yamamoto, chief foreign exchange strategist at Mizuho Securities, said that although Japan has had only limited success in stemming the yen's sharp fluctuations, there is a good chance it will behave again even if the currency does not exceed the 160 level against the dollar. .
He added: “Japan must have the support of the G7, including the United States, to intervene in the currency market again.” “If the yen moves sharply in one day from the current level to say 158 yen or more, it may take action again.”
($1 = 157.3200 yen)
