FOCUS: Japan Resolved to Prop Up Yen thru Intervention

Tokyo, May 2 (Jiji Press)–Desperately hoping to stop the yen’s rapid depreciation, the Japanese government and the Bank of Japan apparently implemented their first currency market intervention in about two years on Thursday afternoon. Earlier that day, the dollar was trading above 160 yen, levels believed to be the defense line for the government and the central bank to conduct yen-buying, dollar-selling interventions. With the dollar climbing to levels unseen since July 2024, when the Japanese authorities previously conducted an intervention, Japanese Vice Finance Minister for International Affairs Atsushi Mimura, who is in charge of intervention-related operations, issued a warning, particularly targeting speculative traders. “This is our final advisory for (market players) to withdraw (from speculative trading),” he said. In 2024, the government and the BOJ conducted market interventions during the Golden Week holiday period between late April and early May, when trading in Tokyo tends to be thin. Just like two years ago, the authorities are believed to have intervened at this specific period. Right before Thursday’s intervention, Finance Minister Satsuki Katayama told reporters, “All I’m going to say is that you should have your smartphones with you at all times, including when you’re out and about and resting at home.” After the remarks by Mimura and Katayama, the dollar plunged to around 155.50 yen in overseas trading. The Japanese authorities are believed to have bought 5 trillion to 6 trillion yen for dollars in the apparent intervention Thursday. On Friday, Mimura made an additional verbal intervention, saying, “The holiday period has just begun.” This raised caution among Tokyo currency market players in the day’s trading, as they were reminded of the interventions by the Japanese authorities on April 29 and May 1, 2024, during the Golden Week. Japan is determined to stanch the yen’s rapid descent out of concern that if left unattended, the Japanese currency may fall to levels that would have massive repercussions on people’s daily lives. A weak yen and soaring crude oil prices reflecting heightened tensions in the Middle East could deliver a devastating blow to households and smaller companies through spikes in prices of many products in the country. Still, many analysts believe that the impact of the latest intervention will not last long because there is no change in the underlying factors that contribute to a weaker yen, such as safe-haven dollar buying ignited by the Middle East crisis and the interest rate gap between Japan and the United States. In 2024, the yen fell back against the dollar after the interventions in April and May, prompting the government and the BOJ to step in the market again in July. Since then, the government has increased options for tackling the yen’s depreciation. In September last year, Japanese and U.S. finance ministers affirmed cooperation over foreign exchange policies. When the yen weakened against the dollar in late January this year, a rate check was carried out by the U.S. Federal Reserve. The process, in which a central bank asks major financial institutions about exchange rate levels, is believed to be a preparatory stage for an intervention. This led to yen buying, causing the dollar to fall below 152.50 yen from around 159 yen without the need for Japan to directly intervene in the currency market. In March this year, a proposal was floated within the government for the country to intervene in the crude oil futures market to suppress speculative trading in an effort to stem the yen’s depreciation. On Friday, Mimura told reporters, “We always have in place a system to launch operations.” END [Copyright The Jiji Press, Ltd.]