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Foreign Exchange

Japan continues to intervene in USDJPY

Japan continued to step into the market to weaken the yen after its record intervention on October 31, figures from the Bank of Japan suggest.

Tokyo’s Ministry of Finance confirmed that it intervened in the market on October 31 after the yen hit a post-war high against the dollar, threatening to undermine the country’s export industry. Jun Azumi, Japanese finance minister said the move was carried out to fight “one-sided speculative moves that don’t reflect the economic fundamental of our economy”.

He pledged to continue to intervene until he was “satisfied”, saying the strength of the yen threatened Japan’s rebound from the March earthquake.

Market estimates suggested the BoJ spent a record amount intervening on October 31 as it pushed USDJPY from a low of Y75.35 up to Y79.20.

Speculation subsequently rose that the BoJ was back in the market as USDJPY stayed closed to Y78, but there was no official confirmation of any action.

Although, official confirmation of the size of any intervention is not available until the end of the month, analysts say it is possible to estimate the size of any action from the BoJ’s current account balances, which it releases every day.

The MoF issues treasury discount bills to the BoJ for intervention funds, and issuing these bills would be shown as increase in treasury funds and others in current account balances at the central bank.

Issei Suzuki , strategist at Citi, said according to these figures the BoJ spent about Y7.7 triliion, ($100 billion) intervening on October 31.

More intriguingly, the figures showed that there was a significant increase in treasury funds and others in the BoJ’s balance sheet on November 4 and November8, suggesting Japan continued to intervene in the market by spending about Y1.1 trillion.

“There may be another reason for the treasury discount bill issuance, of course, but this data suggests that Japanese authorities may have continued to intervene to keep USDJPY from dipping much below Y78,” said Suzuki.

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