According to an analysis by Bloomberg of central bank accounts, Japanese authorities may have intervened in the foreign exchange market with another $30 billion just days after taking earlier action, the latest sign of their determination to support the yen.
According to the accounts released by the Bank of Japan on Thursday and the predictions of currency brokers, the scale of the market inflow this time may be approximately 4.68 trillion yen. Thursday was the first working day after the Golden Week holiday (which ended on Wednesday).
A similar calculation based on Bank of Japan account data showed that the authorities’ previous estimate of spending about 3.86 trillion yen ($24.7 billion) to support the yen on April 30 was revised down on Thursday.
The latest data do not clarify whether multiple interventions have taken place since last weekend or on which day such actions might have occurred, although the sharp rise in the yen on Wednesday sparked speculation that officials had entered the market.
Thursday’s report highlighted the determination of the Ministry of Finance to prevent speculators from shorting the yen and to keep the yen from falling below the key threshold of 160 yen to the dollar – a level close to where officials intervened multiple times in 2024.
According to Naoyuki Ueno, chief economist at the NLI Research Institute, the data suggest that the government may have intervened in the market on Friday and then again at some point between Monday and Wednesday.
Ueno said, “This round of intervention seems to have worked because market panic still exists and traders remain highly vigilant.”
Despite this, the move indicates that Tokyo has to continue to intensify its efforts to curb speculators. Moreover, the timing of the move is rather awkward, coming just as US Treasury Secretary Scott Bessent is about to visit Japan. Although Bessent helped Japan boost the yen during its weakness in January, he has suggested that the Bank of Japan needs to accelerate the pace of interest rate hikes, which is the main way to stabilize the yen.
The next meeting of the central bank will be held in June. Although overnight swap data indicates that the market generally expects a 72% possibility of the Bank of Japan raising interest rates at that time, officials from the Ministry of Finance still need to control speculative behavior during this period.
In this sense, the latest round of market operations will only buy time for the Japanese authorities and will not change the economic fundamentals of a weak yen or a strong dollar. The current economic environment remains favorable for the dollar. Although there is hope for a de-escalation of the conflict in Iran, energy prices remain high, and the Federal Reserve seems to have not yet taken measures to cut interest rates.
Ueno said, “The psychological warfare between the Japanese authorities and market participants will continue.”
Currency brokers at Tokyo, Central and Ueda Harlow foreign exchange markets had previously expected that the Bank of Japan’s current account would increase by 166.7 billion yen on Friday without intervention. But the central bank’s data released on Thursday showed that it expected the current account to decrease by 4.51 trillion yen, suggesting that the bank might intervene in the foreign exchange market again.
Katahira and Muraoka have repeatedly mentioned their close coordination with the United States on monetary issues. They may hope that Besant does not again call on the Bank of Japan to act more quickly during his visit.
Ueno said, “It would be best for Besant if they could understand the recent monetary policy of the Japanese authorities.”
