According to trader estimates, the Japanese government may have spent more than $30 billion last week to stabilise the yen after it dropped to its lowest level versus the dollar in 32 years. This was their second intervention in a month.
The intervention took place on Friday after the yen momentarily rose to 144.50 yen during a slow phase of the week after reaching a rate of 151.94 yen to the dollar.
The Japanese prime minister, Fumio Kishida, stated that the government will take “necessary steps” to address the excessive volatility in currency markets during a weekend visit to Australia.
We cannot tolerate extreme swings brought on by the circulation of rumours, according to Kishida. Officials from the Ministry of Finance would to comment on whether they had intervened on Friday, but two government insiders said that it had been done.
In September, the government had already spent $ 20 billion to buy Japanese yen for the first time since 1998.
After the intervention of last month, Bank of America estimated that the Japanese government, which owns $ 1. 3 trillion of foreign reserves, could implement up to 10 other interventions by selling liquid assets.
According to the Japanese media, Masso Canda, the nation’s top currency official, recently said that the government has “unlimited” funds available to undertake interventions.
Analysts say that the effectiveness of such interventions will be limited as long as the interest rates between Japan remain very lenient and the heavy United States.
As both organisers in Taiwan and South Korea provide support for the market, Japan is not alone in its struggle to react to abrupt changes in the financial markets.
The latest intervention had a bigger impact than anticipated, according to Takahid Kiuchi, an executive economist at the Nomura Research Institute.
“There is also a chance that the amount of the currency intervention will be significant,” Kyushi added.
Currency traders predicted that Japan intervened with at least $ 30 billion.
Analysts speculated that this action may have been prompted by a Wall Street Journal report that the Federal Reserve officials will likely discuss whether or not to agree to a smaller increase in interest rates in December due to the intensifying pressure on the world economy from sharp increases in interest rates next month.
What is Japan’s strategy to support the yen? “30 billion dollars in a week”
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