Japan may have intervened in FX market by spending $46.9 billion to buy yen

Japan has struggled to prevent a decline in the yen, which pushes up import prices and stokes inflation.

TOKYO – Japan may have spent as much as US$36.58 billion (S$46.9 billion) to buy yen in the latest action aimed at strengthening the local currency, central bank data indicated on Aug 3, continuing an effort to bring the yen’s value back from historic lows against the US dollar.

The Bank of Japan’s (BOJ’s) projection for money market conditions for the following day points to a 11.4 trillion yen (S$93.2 billion) net fund outflow, compared with brokerage forecasts of 5.66 trillion yen to 6.70 trillion yen.

Outsized outflows are typically interpreted as correlating with the size of any intervention.

Japan and the US have conducted coordinated yen-buying intervention and will not hesitate to take further action, Japan’s Finance Ministry said on Aug 3, confirming rare bilateral action to halt the yen’s slide to 40-year lows.

BOJ data on July 31 showed Japan may have sold as much as US$58.97 billion to shore up the yen after the Japanese currency rose sharply in New York on July 30.

After paring gains, the yen leapt again late on Aug 3 in what traders suspected was further intervention. The BOJ held its policy interest rate at 1 per cent earlier in the day.

A widening interest rate differential with the US, where the Federal Reserve has shifted to a more hawkish stance, has been a key factor in the dollar’s rise against the yen.

Japan has struggled to prevent a decline in the yen, which pushes up import prices and stokes inflation, thereby reducing household spending power and pressuring Prime Minister Sanae Takaichi’s public approval rating. REUTERS