Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Japan spent record of nearly $20.0 billion on intervention to support the yen

Published 09/29/2022, 08:22 PM
Updated 09/30/2022, 11:30 PM
© Reuters. FILE PHOTO: Banknotes of Japanese yen are seen in this illustration picture taken September 23, 2022. REUTERS/Florence Lo/Illustration/File Photo

© Reuters. FILE PHOTO: Banknotes of Japanese yen are seen in this illustration picture taken September 23, 2022. REUTERS/Florence Lo/Illustration/File Photo

By Leika Kihara and Tetsushi Kajimoto

TOKYO (Reuters) - Japan spent up to a record 2.8 trillion yen ($19.7 billion) intervening in the foreign exchange market last week to prop up the yen, Ministry of Finance data showed on Friday, draining nearly 15% of funds it has readily available for intervention.

The figure was less than the 3.6 trillion yen estimated by Tokyo money market brokers for Japan's first dollar-selling, yen-buying intervention in 24 years to stem the currency's sharp weakening.

The ministry's figure, indicating total spending on currency intervention from Aug. 30 to Sept. 28, is widely believed to have been used entirely for the Sept. 22 intervention. It would surpass the previous record for dollar-selling, yen-buying intervention in 1998 of 2.62 trillion yen. Confirmation on the dates of the spending will be released in November.

"This was a big burst of intervention, if it had happened on a single day, underscoring Japanese authorities' determination to defend the yen," said Daisaku Ueno, chief forex strategist at Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley (NYSE:MS) Securities.

"But the impact of further intervention will diminish as long as Japan continues to intervene solo," he said.

The intervention, conducted after the yen slumped to a 24-year low of nearly 146 to the dollar, triggered a sharp bounce of more than 5 yen per dollar from that low, although the currency has since drifted down again to around 144.25.

"Recent sharp, one-sided yen declines heighten uncertainty by making it difficult for companies to set business plans. It's therefore undesirable and bad for the economy," Bank of Japan Governor Haruhiko Kuroda was quoted as saying at a meeting with cabinet ministers on Friday.

Japan held roughly $1.3 trillion in reserves, the second biggest after China, of which $135.5 billion was held as deposits parked with foreign central banks and the Bank for International Settlements (BIS), according to foreign reserves data released on Sept. 7. Those deposits can easily be tapped to finance further dollar-selling, yen-buying intervention.

"Even if it were to intervene again, Japan likely won't have to sell U.S. Treasury bills and instead tap this deposit for the time being," said Izuru Kato, chief economist at Totan Research, a think-tank arm of a major money market brokerage firm in Tokyo.

If the deposits dry up, Japan would need to dip into its securities holdings sized around $1.04 trillion.

Of the main types of foreign assets Japan holds, deposits and securities are the most liquid and can be converted into cash immediately.

Other holdings include gold, reserves at the International Monetary Fund (IMF) and IMF special drawing rights (SDRs), although procuring dollar funds from these assets would take time, analysts say.

© Reuters. FILE PHOTO: Banknotes of Japanese yen are seen in this illustration picture taken September 23, 2022. REUTERS/Florence Lo/Illustration/File Photo

($1 = 144.4000 yen)

(This story corrects to add dropped word 'to' in first paragraph)

Latest comments

are any of these countries; Japan, Russia, China, India, France, Canada, using GOLD to bolster their currency? Anybody comes fwd. n post.
Its time to rethink decoupling from USD & look underneath for potential & create value for the native currencies. This way, countries can be resilient & not be dependant on anyone's whims & fancies. A true security.
All countries got destroy by Powell but they can still only say thanks Powell
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.