By Kevin Buckland
TOKYO (Reuters) – Japanese authorities have spent 5.53 trillion yen ($36.8 billion) this month on currency market intervention to push the yen below a 38-year low, official data showed on Wednesday.
The Finance Ministry data confirmed traders’ and analysts’ suspicions after the yen surged on July 11 and 12, which money market estimates put the value at 5.71 trillion yen.
In the two days since July 11, the yen rose from 161.76 per dollar to 157.30.
Wednesday’s data covers only the period from June 27 to July 29. A breakdown by day will be available in quarterly data, due in about three months.
The latest Finance Ministry initiative differed from other recent rounds of intervention — including a record ¥9.79 trillion intervention in delayed April and early May — because officials were buying yen when the dollar was already depreciating amid surprisingly tender U.S. consumer inflation.
Still, analysts pointed to factors other than the dollar sell-off in Tokyo that contributed to the yen’s gains this month.
The dollar fell again after Republican presidential candidate Donald Trump said he wanted a weaker currency. That was quickly followed by a string of high-profile Japanese politicians, including the prime minister, calling for short-term interest rate hikes by the Bank of Japan to curb the yen’s weakness.
The BOJ’s decision to raise interest rates on Wednesday and a subsequent hawkish news conference by Governor Kazuo Ueda sent the dollar spiraling towards the 150 yen mark. At 10:39 GMT, it was at 150.37 yen.
“I’m not saying the intervention didn’t have an impact. It did. But if Trump and others hadn’t come out and said what they said, we probably would have gone back to about 160,” said Shoki Omori, chief Japan strategist at Mizuho Securities.
Despite growing expectations for further normalization of policy by the Bank of Japan, Omori expects the yen to weaken again in August.
“A mere 25 basis points increase in interest rates does not necessarily make carry trade less attractive,” he said, referring to the practice in which market participants borrow yen at near-zero interest rates in Japan and invest them in higher-yielding assets overseas, including in the United States.
The Japanese authorities have adopted a policy of refraining from confirming intervention, while constantly warning that they are ready to take action at any time to counter unilateral, speculative currency movements.
Tokyo still has ample room to act again, with foreign reserves reaching a staggering $1.23 trillion at the end of June and the tender yen remaining unpopular with the public and could play an essential role in the ruling party’s leader election in September.
But further intervention would take place under recent leadership, with Masato Kanda’s term as Japan’s top currency diplomat ending on Tuesday. Financial regulation expert Atsushi Mimura has taken over as vice finance minister for international affairs, saying in an interview that intervention remains on the table.
(1 dollar = 150.4200 yen)
