Japan's continued intervention in the yen has limited effect
According to a report by Yomiuri Shimbun on May 7: The Japanese government and the Bank of Japan injected between 4 to 5 trillion yen on April 30 by buying and selling U.S. dollars to intervene in yen exchange rates, and from May 1 to 6—including during the May Day long holiday—it is likely that another 5 billion yen was continuously deployed to curb further depreciation of the yen.
Based on forecasts released by the Bank of Japan up to May 8 regarding current account balances, the "fiscal and other factors" affected by foreign exchange interventions decreased by 4.51 trillion yen compared to the previous day.
Market expectations had anticipated an additional reduction of about 500 billion yen in the current account balance, suggesting that the total difference of approximately 4 to 5 trillion yen corresponds to the intervention amount.
When conducting foreign exchange interventions involving the purchase and sale of U.S. dollars, yen-denominated funds are transferred from the Bank of Japan’s demand deposit accounts held by private financial institutions into the treasury, thereby reducing the balance in those demand accounts. Since fund settlements take two business days to complete, the forecast for May 8 reflects data from the day before the holiday as well as trading activity over the 4–6 days in overseas markets.
On May 1, 4, and 6, the yen briefly surged sharply in the foreign exchange market.
On the morning of May 7, Finance Minister Jun Miyamura declined to comment on whether the yen exchange rate would be intervened.
Senior foreign exchange analyst Takuya Kanda from the Institute for Foreign Exchange Research analyzed: “If high oil prices coincide with yen depreciation, it will significantly impact people’s livelihoods; thus, the Japanese government decided to intervene. However, the current downward trend of the yen reflects actual shifts in market demand, making government intervention largely ineffective.”
On the first day after the May Day long holiday, the yen closed at Tokyo’s foreign exchange market at 5 p.m. today, rising 35 yen against the previous trading day, reaching 1 USD = 156 yen 26 to 28 sen, with the dollar weakening.
Original article: toutiao.com/article/1864530195394699/
Disclaimer: This article represents the personal views of the author