Japan may have intervened in FX market by spending $46.9 billion to buy yen
Japan has struggled to prevent a decline in the yen, which pushes up import prices and stokes inflation.
Japan may have invested up to US$36.58 billion (S$46.9 billion) in buying yen to strengthen the local currency, data from the Bank of Japan indicated on Aug 3. This action, part of an ongoing effort to boost the yen's value after it hit record lows against the US dollar, resulted in a projected 11.4 trillion yen (S$93.2 billion) net fund outflow the following day, significantly surpassing the range of 5.66 trillion yen to 6.70 trillion yen estimated by brokers.
Such outsized outflows are typically viewed as indicative of intervention. Japan and the US have reportedly conducted coordinated yen-buying interventions and are prepared to take further action, according to the Finance Ministry's statement on Aug 3. This joint effort comes as a response to the yen's slide to 40-year lows. Earlier data from the BOJ on July 31 suggested Japan may have sold up to US$58.97 billion to bolster the yen following a sharp rise in the currency's value in New York on July 30.
Despite this intervention, the yen rebounded late on Aug 3, leading traders to suspect additional intervention. The Bank of Japan maintained its policy interest rate at 1 percent earlier that day. The widening interest rate gap between Japan and the US, where the Federal Reserve has adopted a more hawkish stance, has been a significant driver behind the dollar's rise against the yen.
Japan has faced challenges in preventing the yen's decline, as this depreciation increases import costs and exacerbates inflation, subsequently reducing household spending power and undermining Prime Minister Sanae Takaichi's popularity.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — it may contain errors, so check the original before relying on it.
