TOKYO - In an effort to curb the yen's depreciation, the government and the Bank of Japan conducted a record 9.7 trillion yen intervention during the long holiday period. Does such an intervention effectively counteract yen depreciation?
The announcement on May 19th by Japan's Ministry of Finance detailed the intervention amount of 9.7 trillion yen, the largest on record. Although the ministry did not specify the exact dates or amounts of each intervention, it is believed that the intervention mainly occurred during the sharp yen depreciation around April 29 and May 2.
Tetsuo Yamazaki, a former Finance Ministry official with experience in foreign exchange intervention, mentioned, 'The scale of the intervention suggests it was a significant and firm action by the Bank of Japan. This intervention, totaling 9.7 trillion yen, even surpasses Japan's trade deficit of about 5.9 trillion yen last year. Thus, the excess yen in the market should help curb yen depreciation.'
Regarding the specific dates, Yamazaki speculated that the intervention on April 29 was likely an emergency response to a sudden speculative move in a thin market during the holidays. The intervention on May 2 was more likely planned, coinciding with the U.S. Federal Reserve's policy announcement, which was less hawkish than expected, prompting a natural yen buy-back.
Yamazaki emphasized, 'The timing of interventions is crucial to counter speculative positions effectively. The goal is not just to adjust the exchange rate but to send a strong warning to speculators. The intervention's success depends on creating a significant price action that forces speculators to reverse their positions.'
Reflecting on his own experience with interventions in 2003 and 2011, Yamazaki noted that large-scale interventions send a powerful message. He highlighted the importance of timing and the scale of interventions to influence market expectations and speculative behavior.
Source: テレ東BIZ
