Source: Finance Association
Author: Zhao Hao
① The amount of Japan's operations between April 26 and May 29 was 9.788.5 billion yen, which exceeded market expectations of 9.4 trillion yen;
② Although the Bank of Japan has joined the ranks of global monetary policy tightening, Japan's short-term interest rate is still only 0.1% compared to the 5.25%-5.50% federal funds rate range.
According to newly released data, the Japanese authorities have spent a record total of 9.8 trillion yen (about 62.2 billion US dollars) in the past month to support the yen exchange rate. This amount exceeds the total amount used to interfere with the foreign exchange market in 2022.
On Friday (May 31) local time, Japan's Ministry of Finance disclosed on its official website the “Implementation Status of Foreign Exchange Balance Operations” from April 26 to May 29. The amount of operations during this period was “9.788.5 trillion yen.” This figure exceeded market expectations of 9.4 trillion yen, and set a new monthly record of 9.1 trillion yen set in 2011.
According to media analysis, record intervention spending shows that the Japanese government is serious about fighting back against speculators. On the other hand, even if you only want to boost the yen for a short time, the scale of action required is huge, which reflects the increasing difficulty of defending the currency.
Hirofumi Suzuki, chief foreign exchange strategist at Sumitomo Mitsui Bank, said, “Overall, this amount feels like a bit large, but it's basically within the expected range. It didn't break through 10 trillion yen, so it doesn't feel like much, and it doesn't actually have much reaction to the dollar against the yen.”
Given that the interest rate gap between Japan and the US is still large, the market expects the yen to continue to be pressured. Although the Bank of Japan has joined the ranks of global monetary policy tightening, Japan's short-term interest rate is still only 0.1% compared to the 5.25%-5.50% federal funds rate range.
Unless there are clear signs that US interest rates are beginning to fall, or the Bank of Japan is more aggressive in pushing to raise borrowing costs or cut debt purchases, a trend shift between the dollar and yen is unlikely. However, there are also opinions that Japanese monetary officials are only trying to gain time, not to reverse the situation.
Hideo Kumano (Hideo Kumano), chief economist at Japan's Dai-ichi Life Economics Research Institute and a former Bank of Japan official, said, “You can't say how much money you spend will have a big impact, because the market is like a living thing.”
“But without these interventions, the yen will depreciate further, so actions close to 10 trillion yen are effective.” Data at the end of April showed that Japan has 1.14 trillion US dollars in foreign exchange reserves, which indicates that the authorities still have sufficient firepower to deal with the Japanese yen shortness.
Editor/Jeffy