Japan Conducts Forex Intervention: Sources

Tokyo, July 31 (Jiji Press)–The Japanese government and the Bank of Japan carried out a yen-buying, dollar-selling market intervention for the first time in about three months on Thursday night, during New York trading hours, informed sources said Friday. U.S. authorities also conducted a rate check, in which officials asked financial institutions about exchange rate levels. With the Japanese and U.S. authorities coordinating to prevent further weakening of the yen, the dollar briefly plunged by about 5 yen to slip below 158 yen, hitting its lowest level since mid-May. Market players estimate that the intervention was large in scale, at more than 5 trillion yen, based on BOJ data that includes moves on intervention funds. When asked by reporters in Tokyo on Friday morning, Finance Minister Satsuki Katayama declined to comment on whether Japanese authorities had intervened to prop up the yen. “We are working on the matter with a sense of vigilance,” she said. The dollar rose to as high as 163.99 yen on July 23, the highest level in about 39 years and 8 months, and hovered around 163 yen prior to the intervention. Although the dollar had fluctuated above 160 yen, which is believed to be a threshold for possible intervention by the Japanese government and the BOJ to prop up the yen, many market players expected that an intervention would be made after the central bank’s two-day policy-setting meeting through Friday. “The element of surprise (from Thursday’s intervention) worked,” said an official at a foreign exchange margin trading company. In late April, just before the Japanese authorities conducted a yen-buying, dollar-selling market intervention, Katayama said that the time for the country to take “decisive action” against the yen’s rapid depreciation was “approaching.” Vice Finance Minister for International Affairs Atsushi Mimura also warned market players that they were being given a “final advisory to withdraw” from speculative trading. After the dollar’s plunge on Thursday, U.S. Treasury Secretary Scott Bessent told U.S. media that the yen has been very undervalued. Mimura said that the Japanese side has received assistance from U.S. authorities “that goes beyond moral support.” In Tokyo trading on Friday, the dollar rose back above 160 yen in the morning. In the late afternoon, however, the U.S. currency plunged below 159 yen again. Although many market participants were skeptical that the Japanese authorities had carried out another intervention, they remained on edge throughout trading. Nothing has changed about the fundamental factors behind the yen’s depreciation, such as concerns over an expansionary fiscal policy by the administration of Prime Minister Sanae Takaichi, safe-haven dollar buying amid tensions in the Middle East and the massive gap between the Japanese and U.S. interest rates. Reflecting this, a think tank official said, “The impact of the intervention to curb the yen’s depreciation will be temporary.” END [Copyright The Jiji Press, Ltd.]