Japan to answer 9.40 trillion yen foreign exchange intervention question, yen still facing devaluation crisis

Forex Platform- On Friday, investors will learn whether the Japanese authorities intervened in currency markets last month to prop up the yen, leaving the beleaguered currency vulnerable to a sell-off if they did not intervene or had to spend much more than expected.

A comparison of the Bank of Japan's deposit and broker forecasts shows that Japan spent about 9.40 trillion yen (about $60 billion) in two rounds of intensive buying on April 29 and May 1. If the scale of the intervention exceeds 9.10 trillion yen, it will set a new record for monthly currency market intervention in Japan.

The Japanese Ministry of Finance has previously refused to confirm or deny anyforeign exchange marketIntervention behavior.

According to reports, Japan's Ministry of Finance plans to release data from April 26 to May 29 at 19:00 Tokyo time (18:00 Beijing time) on Friday to answer this question.

The wild swings in the market, the outflows from the Bank of Japan's accounts and the apparent timing of avoiding immediate disclosure a month ago all suggested that the Japanese authorities had indeed bought a large amount of yen and wanted to delay confirmation as long as possible.

In early Tokyo trading on Friday, the yen rose about 0.1 percent to Y156.65 against the dollar, having erased most of its gains since May 1.

Shusuke Yamada, head of Japan currency and interest rate strategy at Bank of America Securities Japan, said how much the Japanese authorities use to support the yen will be the focus of the market. If the data shows that the authorities need to use a lot of money to stop the depreciation trend, it will raise concerns about sustainability, and the use of a small amount of money means that the intervention is quite effective.

Since interest rates in Japan are only slowly rising, while rates in the United States and Europe have not yet fallen, officials at the Japanese Ministry of Finance and the Bank of Japan have been trying to buy time for the yen until interest rate spreads start to narrow.

At the same time, the depreciation of the yen has pushed up the cost of Japanese imports, hurting the interests of Japanese households and making financial marekts nervous.

On April 29, the yen surged more than 5 yen against the dollar after falling to 160 yen against the dollar for the first time since 1990.

On May 1, in late trading in New York, the yen skyrocketed from around 157.52 to 153.04 in 40 minutes.

However, the yen is still down against all other G10 currencies so far this year, and is down 10% against the dollar.

If Japan does spend 6.20 trillion yen on the first operation and 3.20 trillion yen on the second, the Japanese authorities have spent more cash in the past month supporting the yen than in 2022. This result suggests that the returns from foreign-exchange intervention are diminishing.

Analysts said a much lower intervention would suggest the finance ministry had used its money more effectively than expected, supporting the yen and potentially allowing Japan to continue intervening in currency markets for longer.