The Japanese authorities have disclosed details of a record one-day intervention to support the yen conducted in April. At that time, 40 billion US dollars were used from the country’s foreign reserves to curb the fall of the national currency. Market participants remain on high alert for new interventions as the yen’s exchange rate again exceeded the 158 yen per US dollar mark, indicating continued pressure on the Japanese currency.
Additionally, investors are awaiting US employment data, which is expected to be released on Friday, August 7. These data could influence the Federal Reserve System’s (FRS) further policy on interest rates. Data from Japan’s Ministry of Finance, released this Friday, showed that the authorities conducted currency interventions over three days from April 30 to May 6, when market liquidity was reduced due to holidays.
Record operations to support the yen
The largest operation was conducted on April 30 and amounted to 6.28 trillion yen (about $40 billion), exceeding the previous one-day record of 5.92 trillion yen set on April 29, 2024. Data from the Ministry of Finance, recorded since 1991, also detail the previously announced record monthly volume of currency interventions of 11.7 trillion yen, carried out from April 28 to May 27.
The intervention helped strengthen the yen’s exchange rate from a nearly two-year low of 160.72 yen per US dollar to approximately 155 yen per US dollar as of May 6, but failed to change the overall trend of its weakening.
Coordinated actions and the FRS mechanism
In July, the yen began to depreciate again, falling below 163 yen per US dollar, the lowest level in 40 years. This prompted Japan to conduct another currency intervention, this time jointly with the USA. According to central bank estimates, on July 30, Japan may have used up to $58.97 billion, and the next day another $36.58 billion. This operation may have become the largest intervention to support the yen in history.
Japan’s Ministry of Finance will release official data on these interventions on August 28. To calm market concerns about the country’s ability to conduct large-scale currency operations, Tokyo and Washington stated that Japan could use the FRS support mechanism established during the Covid-19 pandemic for leading central banks. Introduced in 2020, the mechanism allows obtaining dollar liquidity without directly selling US Treasury bonds.
FRS data showed that during the week ending August 5, no repo operations were conducted through official foreign accounts. This indicates that Japan did not use this mechanism during the last intervention. At the same time, as part of coordinated actions, the US Treasury Department sold euros and bought yen.
Source: Folha de S.Paulo
