Japan will release significant data on Friday, detailing its foreign exchange market interventions in May to support the yen. These efforts prevented the yen from reaching new lows but are unlikely to reverse its longer-term decline.
It is estimated that Tokyo spent approximately 9 trillion yen ($57.11 billion) on April 29 and May 2 to stop the yen's sharp fall to a 34-year low of 160 yen to the dollar. Authorities have remained silent on whether they conducted "stealth intervention," keeping markets anticipating Friday's data, which will cover expenditures from April 26 to May 29.
The monthly data will only reveal the total amount spent on currency intervention during this period. Detailed daily breakdowns will be available in the April-June quarterly data, expected in early August.
After reaching a 34-year low of 160.245 yen on April 29, the yen rebounded, likely due to suspected interventions, but has hovered near the 160 mark. This level is widely regarded as the threshold for intervention.
Market focus is now on whether and when Japan will intervene again. This decision will depend on the strength of the U.S. economy and the Federal Reserve's rate policy, while the Bank of Japan (BOJ) is expected to be cautious about raising interest rates this year.
Japan renewed its commitment to counter excessive yen depreciation at a recent Group of Seven (G7) financial leaders' meeting, where the group reiterated warnings against excessive currency volatility.
"Given the lack of opposition from other countries, Japan is likely to continue its efforts to curb excessive yen falls through intervention," said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.
However, U.S. Treasury Secretary Janet Yellen recently emphasized that intervention should be reserved for "exceptional" cases, reaffirming her belief in market-determined exchange rates.
Japan's top currency diplomat, Masato Kanda, has also issued a warning about the potential for renewed intervention, stating that Japan is ready to act "any time" to counter excessive yen movements. Kanda, the vice finance minister for international affairs, previously led yen-buying operations in 2022, spending about 9.2 trillion yen over three days.
Despite limited success in curbing sharp yen fluctuations, Japan might intervene again even if the yen doesn't surpass the 160-to-the-dollar mark, according to Masafumi Yamamoto, chief FX strategist at Mizuho Securities. "Japan must have secured G7 backing, including from the U.S., to intervene in the currency market again," he said. "If the yen experiences sharp single-day moves from the current level to around 158 yen or beyond, intervention might occur again."
On Friday, the dollar traded at 156.850 yen, close to the 160-yen threshold.
Paraphrasing text from "Reuters" all rights reserved by the original author.
