Japan Spends ¥9.7 Tril. in Forex Interventions during Holiday

Japan has reportedly spent a record-high amount of ¥9,788.5 billion ($89.3 billion) in foreign exchange market interventions from late April to early May. The country’s authorities are believed to have conducted stealth yen-buying dollar-selling interventions during the Golden Week holiday period, causing the dollar to suddenly lose ground against the yen. This amount spent on interventions is the highest on a monthly report basis, according to the Finance Ministry. The yen remains weak against the dollar following the interventions, prompting Finance Minister Shunichi Suzuki to state that they will respond appropriately to excessive movements. In autumn 2022, Japanese authorities last conducted foreign exchange market interventions when they spent ¥9,188.1 billion in three rounds of yen-buying dollar-selling interventions from September to October. However, the recent round of interventions is believed to have exceeded the earlier record. On April 29, when the Tokyo market was closed for a national holiday, the dollar reportedly plunged below ¥155 after surging above ¥160 in overseas trading. Speculation at the time indicated that intermittent yen-buying dollar-selling interventions worth approximately ¥5 trillion were conducted amid thin trading to prevent sharp depreciation of the yen. In the early morning of May 2, the dollar sagged below ¥154 from around ¥157.5, leading to speculation of an additional intervention worth about ¥3 trillion. Masato Kanda, vice finance minister for international affairs, who oversees currency interventions, has warned of possible interventions while refraining from commenting on whether such actions were actually taken. Meanwhile, U.S. Treasury Secretary Janet Yellen has expressed her view that currency interventions should only be conducted rarely. The recent interventions have occurred amid ongoing efforts to contain the impact of the COVID-19 pandemic on the global economy. Countries around the world have been implementing a range of economic and monetary measures to limit the impact of the health crisis, including exchange rate interventions. The Japanese government’s foreign exchange market interventions have been criticized by some as leading to a “race to the bottom” in terms of currency policies. However, the government has defended its actions, stating that they are intended to prevent excessive currency movements and support economic stability. The yen-dollar exchange rate has remained relatively stable in recent years, with the Japanese currency strengthening against the dollar in 2018 before weakening again in 2019 and 2020. The recent interventions have appeared to support the yen against the dollar, leading some analysts to suggest that the Japanese government is seeking to keep the currency from depreciating too rapidly. Overall, the interventions reflect ongoing efforts by governments around the world to respond to the economic fallout of the COVID-19 pandemic. While the use of currency interventions has sparked debate and criticism, many governments continue to rely on such measures to stabilize their economies and protect against sudden fluctuations in exchange rates