Japan Spends ¥9.7 Tril. in Forex Interventions during Holiday

Japan Records Record Intervention in Foreign Exchange Market

The Ministry of Finance in Japan has reported that the country spent a whopping ¥9,788.5bn in foreign exchange market interventions between April 26 and Wednesday, marking a record monthly spend ever. The sudden drop of the US dollar's value against the yen on April 29 and May 2, during Japan's Golden Week holiday period, suggests that Japanese authorities conducted stealthy yen-buying dollar-selling interventions. In 2022, the last time such interventions took place, Japan spent ¥9,188.1bn over three rounds of yen-buying dollar-selling interventions from September to October. Despite its latest round of interventions, the yen remains weak when compared to the dollar.

The Finance Minister, Shunichi Suzuki, stated that Japan would appropriately respond to excessive movements, in light of the new wave of currency interventions.

During Japan's Golden Week holiday period, the dollar took a significantly sharp plunge against the yen but rebounded shortly after the intervention occurred. The Tokyo market was closed for a national holiday on April 29, and the dollar plunged below ¥155 but surged above ¥160 in overseas trading. There was speculation at the time that intermittent yen-buying dollar-selling interventions worth around ¥5tn were conducted amidst thin trading to prevent sharp depreciation of the yen.

The Ministry of Finance's report shows that the dollar sagged below ¥154 from around ¥157.5 on May 2, prompting speculation that an additional intervention worth about ¥3tn was involved. However, Masato Kanda, the vice finance minister for international affairs overseeing currency interventions, has refrained from commenting on whether such actions were actually taken.

U.S. Treasury Secretary, Janet Yellen, stated last week that currency interventions should only occur infrequently. The statement suggests concern over the increasing number of countries joining the currency game. The effectiveness of interventions dwindles when several central banks intervene at once, as in a currency war.

One outcome of currency interventions is a boost in consumer spending, especially when there is an unsaturated demand for foreign goods. However, this can cause other countries to take action to devalue their currencies similarly, ultimately leading to a currency war. 

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