Yahoo Finance BOJ Accounts Suggest Japan Intervened Monday to Support Yen
(Bloomberg) -- Japan likely conducted its first currency intervention since 2022 to prop up the yen on Monday, according to a Bloomberg analysis of central bank accounts.
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The BOJ reported Tuesday that its current account will probably fall ¥7.56 trillion ($48.2 billion) due to fiscal factors including government bond issuance and tax payments on Wednesday. That’s much bigger than a drop of about ¥2.1 trillion estimated by private money brokers, suggesting that intervention of about ¥5.5 trillion took place.
The analysis suggests Japan’s currency authorities have entered a new phase in their handling of forex after a rapid depreciation in the yen to beyond 160 per dollar Monday, following weeks of verbal intervention. The Ministry of Finance has refrained from confirming whether there was intervention in a sign that it prefers to keep traders guessing.
“As far as we can tell by looking at changes in the BOJ current account, we can say there’s a high likelihood intervention took place on the 29th,” said Teppei Ino, Tokyo head of global markets research at MUFG Bank Ltd. “The amount of about ¥5 trillion is largely in line with expectations.”
Totan Research Co. estimated that the BOJ’s current account balance would drop ¥2.1 trillion due to fiscal factors including government bond issuance and tax payments. Central Tanshi Co. forecast a ¥2.05 trillion decline.
The Bloomberg calculation offers only ballpark figures rather than specific amounts. The same math proved accurate in showing that a jump in the yen in jittery markets in October 2023 was not the result of Japan stepping in to buy the currency. The calculation also estimated the size of intervention on Oct. 21, 2022 at around ¥5.5 trillion. Official figures released later showed the volume turned out to be ¥5.6 trillion.
Read more: Japan Opts to Keep Traders in Dark on Whether It Intervened
Japan’s top currency official Masato Kanda said Tuesday that excessive currency moves driven by speculation will have a negative impact on the economy, and authorities will take appropriate action to counter such movements. He didn’t say though whether Japan stepped into the market on Monday, and added that the finance ministry will make sure to disclose results of operations at the end of next month.
“A simple calculation suggests that intervention was around the same size as the biggest move in 2022,” said Shunsuke Kobayashi, chief economist at Mizuho Securities Co., pointing to the diminishing returns of Japan’s entry into markets. “You can say the government had to waste money to buy time. If it ends up like this, the market will lose its wariness and the next intervention will be less effective.”
Read more: How to Tell if Japan Intervened to Prop Up the Yen: QuickTake
The suspected intervention likely took place Monday after the yen hit 160 against the dollar for the first time since 1990. A sharp rebound in the yen followed later in the day, driving speculation that Japan had stepped back into markets to support its currency for the first time since 2022. The currency rallied more than 2%.
--With assistance from Daisuke Sakai and Erica Yokoyama.
(Adds comments from analysts)
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