The BOJ and the Japanese government intervened for the first time in 24 years to buy the yen and sell the dollar Thursday, but it takes two business days for the settlements to show in the central bank’s accounts. Friday was a national holiday, so the scope of the intervention will become apparent Tuesday.
On Monday, the BOJ posted projected sources of changes for Tuesday’s current-account balances. The numbers show the balances decreasing by ¥3.6 trillion for “treasury funds and others”, a category that reflects foreign exchange intervention.
Without the currency intervention, the category would decline by only zero to ¥700 billion on Tuesday, according to an estimate by a money market dealer. This would place the price tag of the intervention somewhere between ¥2.9 trillion and ¥3.6 trillion.
Any figure in that range would trounce Japan’s previous record for intervening in the currency market, set on April 10, 1998, at ¥2.62 trillion. The ministry of finance will announce the official numbers later.
Given the limited funds to buy the yen, the size of the previous intervention provides a major clue to Japanese financial officials’ next steps. The balance of Japan’s foreign exchange reserves – the war chest for currency intervention – stands at US$1.29 trillion. Of this, US$136.1 billion is in deposits that can be used immediately to intervene.
After Thursday’s intervention, the Japanese currency strengthened briefly from the range of 145 per dollar to the 140 range. But now it is once again trending weaker. Currency speculators are selling the yen to take advantage of how the BOJ’s ultraloose policy is not in line with the finance ministry’s efforts to rein the weak yen in.
Speaking to reporters late Monday, BOJ governor Haruhiko Kuroda called the intervention “highly appropriate” and reiterated how the intervention quickly strengthened the currency by about ¥5.
“Even now, the yen is moving at about 143 yen, so the effect has not run out,” Kuroda said after meeting with business leaders in Osaka.
“The intervention was meaningful,” said Masayoshi Matsumoto, chairman of the Kansai Economic Federation. Matsumoto is chairman and CEO of Sumitomo Electric.
Many in the market question the sustainability of the yen intervention’s positive impact if the BOJ maintains its expansive monetary easing that has contributed to the yen’s depreciation.
Speaking to reporters Monday after a cabinet meeting, finance minister Shunichi Suzuki pledged to “take the necessary response” to further weakening by the yen.
“There’s no change to our stance,” Suzuki said.
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