Japan spends record ¥15.39 trillion in July-August forex interventions

Japanese authorities engaged in record foreign exchange market interventions worth ¥15.39 trillion from July 30 to August 3, marking the largest monthly amount spent on yen-buying and dollar-selling measures, according to the Finance Ministry. The government and the Bank of Japan initiated these interventions to counter the historically weakening yen, representing the first series of such actions in nearly three months.

This follows previous interventions during Japan's Golden Week holiday in late April and early May, totaling ¥11.73 trillion. The cumulative foreign exchange intervention operations for the year now exceed ¥27 trillion, surpassing the previous annual record of about ¥15 trillion set in 2024.

The dollar reached ¥164 in late July, the highest level in about 39 years and eight months, before dropping to below ¥158 following the interventions. The greenback rebounded to over ¥160 the following day but fell again below ¥158. On August 3, the dollar once more declined against the yen. Japanese Finance Minister Satsuki Katayama and U.S. Treasury Secretary Scott Bessent confirmed that the yen-buying, dollar-selling intervention between the two nations had not been seen in approximately 28 years on July 31.

They emphasized their commitment to coordinated efforts to halt the yen's depreciation, vowing to continue joint interventions if necessary. The U.S. intervention operations' size remains undisclosed.

Despite the recent interventions, the dollar had climbed to around ¥160 by Friday, signaling concerns over inflation due to the Middle East crisis, the widening interest rate gap between Japan and the United States, and caution regarding Japan's expansionary fiscal policy under Prime Minister Sanae Takaichi's administration. Katayama stated that the Japan-U.S. finance ministers' joint statement from September of the previous year, supporting currency market interventions, was "very strong."

However, many in the market believe that reversing the weak yen trend solely through currency interventions is a formidable challenge.