Japan spent record US$96.5 billion to support yen over past month, data shows
Intervention included rare joint action with US, South Korea
Add BT as a preferred source
[TOKYO] Japanese authorities spent a record 15.4 trillion yen (US$96.5 billion) intervening in foreign exchange markets over the past month to support the local currency, Finance Ministry data showed on Friday (Aug 28).
The size of the intervention shows the level of Tokyo’s resolve to pull the yen away from four-decade lows, with currency weakness threatening profits at Japan’s heavyweight exporters and pushing up import costs, including for energy.
Japan imports almost all its energy, with 95 per cent of that coming from the Middle East, exposing it to supply disruption caused by the Iran war.
But the relatively slow pace of Bank of Japan (BOJ) policy tightening has kept Japan’s interest rates low compared with markets such as the US, encouraging investors to continue funding global trades with cheap yen.
The BOJ held rates steady at its last meeting in July, although policymakers have signalled a willingness to step up the pace of tightening, and markets assign 65 per cent odds to a hike at the next meeting in September.
Friday’s Finance Ministry data gives a total for the period spanning Jul 30 to Aug 26. A detailed daily breakdown will not be available until quarterly figures are released, probably in early November.
The BOJ entered the market to buy yen on Jul 30 and Jul 31 – including rare joint action with the US – as the Japanese currency plumbed its weakest levels in 40 years near 164 per US dollar.
The Bank of Korea also timed its own won-buying intervention with Japan’s to amplify the effectiveness, South Korean officials said at the time.
BOJ data from earlier this month suggest the intervention on Jul 30 could have been as much as 9.6 trillion yen, which would far surpass the current confirmed daily record of 6.3 trillion yen from Apr 30 this year.
The yen shot from around 163 per dollar initially to as strong as 155.20 by Aug 3, before stabilising around 159.50, where it has been stuck since Aug 10.
To convince markets about Japan’s continued capacity for large-scale intervention, Washington has said that Tokyo could use a Covid-era Federal Reserve backstop for major central banks.
The Fed facility, introduced in 2020 to steady markets during the pandemic, allows Japan to raise dollar liquidity without outright sales of US Treasuries.
US Treasury Secretary Scott Bessent said earlier this month that Washington will do “whatever it takes” to support Tokyo’s effort to stabilise the yen, adding that its substantial undervaluation could trigger other economic problems or competitive devaluations of other currencies. REUTERS
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
