Japan spent a record nearly $20.0 billion on intervention to support the yen

  • Intervention drains almost 15% of readily available funds
  • Japan may avoid selling US Treasuries for now ̵[ads1]1; analysts
  • The effect of further intervention may decrease – analysts

TOKYO, Sept 30 (Reuters) – Japan spent up to a record 2.8 trillion yen ($19.7 billion) intervening in the currency market last week to prop up the yen, finance ministry data showed on Friday, draining nearly 15% of the funds the country has readily available for intervention.

The figure was less than the 3.6 trillion yen estimated by Tokyo money market brokers for Japan’s first dollar-selling, yen-buying intervention in 24 years to halt the currency’s sharp weakening.

The ministry’s figures, which indicate total expenditure on currency intervention from 30 August to 28 September, are believed to have been used exclusively for the intervention on 22 September. That would surpass the previous record for dollar-selling, yen-buying intervention in 1998 of ¥2.62 trillion. Confirmation of the dates for the expenses will be released in November.

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“This was a major intervention, if it had happened in a single day, and underscored the Japanese authorities’ determination to defend the yen,” said Daisaku Ueno, chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities.

“But the impact of further intervention will diminish as long as Japan continues to intervene alone,” he said.

The intervention, carried out after the yen fell to a 24-year low of nearly 146 against the dollar, triggered a sharp pullback of more than 5 yen per dollar from the trough, although the currency has since drifted back down to around 144.25.

“Recent sharp, one-sided yen falls increase uncertainty by making it difficult for companies to set business plans. It is therefore undesirable and bad for the economy,” Bank of Japan Governor Haruhiko Kuroda said at a meeting of ministers on Friday. .

Japan held about $1.3 trillion in reserves, the second largest after China, of which $135.5 billion was held as deposits parked at foreign central banks and the Bank for International Settlements (BIS), according to foreign reserves data released on July 7. September. can easily be used to finance further dollar-selling, yen-buying intervention.

“Even if it were to intervene again, Japan will likely not need to sell US Treasuries and instead tap this deposit for the time being,” said Izuru Kato, chief economist at Totan Research, a big-money think tank. market brokerage firm in Tokyo.

If deposits dry up, Japan will have to dip into its securities holdings of about $1.04 trillion.

Of the main types of foreign assets Japan has, deposits and securities are the most liquid and can be converted into cash immediately.

Other holdings include gold, International Monetary Fund (IMF) reserves and IMF Special Drawing Rights (SDRs), although it will take time to raise dollar funds from these assets, analysts say.

($1 = 144.4000 yen)

(This story corrects to add dropped word ‘to’ in first paragraph)

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Reporting by Leika Kihara and Tetsushi Kajimoto; Editing by Sam Holmes, Edmund Klamann and Shri Navaratnam

Our standards: Thomson Reuters Trust Principles.

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