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Former finance officer analyzes the move

TOKYO, Jun 01 (News On Japan) – In an effort to curb the yen’s depreciation, the government and the Bank of Japan made a record 9.7 trillion yen intervention during the long holiday period. Can such an intervention effectively counter the yen’s depreciation?

The May 19 announcement by Japan’s Ministry of Finance detailed the intervention amount of 9.7 trillion yen, the largest on record. While the ministry did not specify the exact dates or amounts of each intervention, it is believed that the intervention took place mainly during the sharp depreciation of the yen around April 29 and May 2.

Tetsuo Yamazaki, a former Treasury Department official with experience in foreign exchange intervention, said: “The scale of the intervention suggests that it was a significant and strong move by the Bank of Japan. This intervention, which totals 9.7 trillion yen, even exceeds Japan’s trade deficit of about 5.9 trillion yen last year. So the excess yen in the market should help curb yen depreciation.”

Regarding the specific dates, Yamazaki speculated that the April 29 intervention was likely an emergency response to a sudden speculative move in a lean market during the holiday season. The May 2 intervention was more likely planned and coincided with the US Federal Reserve’s policy announcement, which was less aggressive than expected and led to a natural buyback of the yen.

Yamazaki emphasized: ‘The timing of interventions is crucial to effectively counter speculative views. The goal is not just to adjust the exchange rate, but to send a strong warning to speculators. The success of the intervention depends on creating significant price action that forces speculators to reconsider their positions.”

Reflecting on his own experiences with interventions in 2003 and 2011, Yamazaki noted that large-scale interventions send a powerful message. He emphasized the importance of timing and scale of interventions to influence market expectations and speculative behavior.

Source: BIZ

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