On Friday, data from Japan’s Ministry of Finance revealed that the country executed its first currency intervention since 2022, following a significant drop in the value of the yen, which hit a 34-year low in April.
The ministry disclosed that between April 26 and May 29, Japan spent a substantial 9.7885 trillion yen (equivalent to $62.25 billion) to bolster the yen, marking its first market intervention since October of the previous year. This intervention period saw the yen rebound sharply after it had plunged to a low of 160.03 against the U.S. dollar on April 29. Following this, the yen made a notable recovery to 156 levels during the same trading session, which fueled speculation about a potential governmental intervention.
JAPAN DEPLOYS BILLIONS TO SUPPORT YEN
Japan’s Ministry of Finance said Friday it had taken steps to intervene in the Japanese yen, after the currency dropped to a 34-year low in April.
Between 26 April and 29 May, the Ministry deployed $62.25 billion to support the yen.… pic.twitter.com/ejO0hRjMdg
— Knightsbridge Research (@KBR_Intel) May 31, 2024
The yen’s value continued to strengthen, showing a more than 2% increase in the following days. Financial analysts from a global research bank had previously estimated that the initial intervention could have been between 5 trillion yen and 6 trillion yen, based on data from the Bank of Japan.
The backdrop to this intervention includes the Bank of Japan’s decision in March to end its policy of negative interest rates, a move that has since put continued pressure on the yen. As of late morning London time on a recent Friday, the yen was trading at 157.25 against the dollar.
Earlier in the month, the Japanese Finance Minister Shunichi Suzuki expressed support for market interventions to stabilize currency fluctuations that could negatively impact households and businesses. However, he refrained from confirming any recent governmental actions to support the yen at that time.
The yen dropped to its lowest level since 1990 before rebounding slightly after Japan's top monetary officials met to discuss the rapidly weakening currency and suggested they were ready to intervene https://t.co/iOnGkFhBtc pic.twitter.com/NyTzusH8wg
— Reuters (@Reuters) March 27, 2024
Suzuki highlighted the necessity of intervening in cases of excessive currency movements to mitigate their impact. He noted in an interview that smoothing out extreme fluctuations could be crucial, signaling a proactive stance on maintaining currency stability.
This recent intervention was not an isolated instance; Japan had previously stepped into the currency markets three times in 2022 to counteract depreciation pressures on the yen, with interventions totaling approximately 9.2 trillion yen throughout that year. These efforts underscore a continued commitment by Japanese authorities to stabilize their currency and manage excessive market volatility effectively.
Major Points
- Japan’s Ministry of Finance confirmed its first currency intervention since 2022, spending 9.7885 trillion yen ($62.25 billion) from April 26 to May 29.
- The intervention was triggered after the yen hit a 34-year low of 160.03 against the U.S. dollar in late April.
- Following the intervention, the yen strengthened, surging more than 2% shortly after the low.
- This move follows the Bank of Japan’s decision to end its negative interest rate policy in March, which had been putting downward pressure on the yen.
- Finance Minister Shunichi Suzuki supported interventions to stabilize the yen, particularly if sharp currency movements negatively impact households and businesses.
Fallon Jacobson – Reprinted with permission of Whatfinger News