Japan spent record $96.5 billion to support yen over past month, ministry data shows

The Finance Ministry of Japan reported on Friday that the country spent an unprecedented 15.4 trillion yen ($96.5 billion) on foreign exchange market interventions over the past month to bolster the local currency. This substantial sum underscores Japan's commitment to elevating the yen, which has been languishing at its lowest point in four decades, a situation that jeopardizes profits for major Japanese exporters and inflates import costs, including energy.

Japan relies heavily on energy imports, with 95% of its energy imports coming from the Middle East, making it vulnerable to supply disruptions due to the ongoing conflict in Iran. Despite the Bank of Japan's relatively cautious approach to policy tightening, which has kept interest rates low compared to markets like the U.S., investors continue to favor cheap yen for funding global trades.

The Bank of Japan maintained its rates steady during its last meeting in July, although there are indications that the central bank is prepared to expedite tightening measures, with a 65% probability of a rate hike at its subsequent meeting in September. The data presented on Friday covers the timeframe from July 30 to August 26.

Detailed daily breakdowns will not be accessible until the quarterly figures are published, expected in early November. Earlier this month, the Bank of Japan was observed engaging in yen-buying interventions on July 30 and 31, along with a rare collaborative effort with the U.S., as the Japanese currency plummeted to its weakest levels in 40 years, trading near 164 per dollar.

The Bank of Korea coordinated its own won-buying intervention with Japan's move to enhance the impact.