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

  • Intervention drains nearly 15% of readily available funds
  • Japan may avoid selling US Treasuries for now – analysts
  • Impact of additional intervention could diminish – analysts

TOKYO, Sept 30 (Reuters) – Japan spent a record 2.8 trillion yen ($19.7 billion) intervening in the foreign exchange market last week to prop up the yen, officials revealed on Friday. data from the Ministry of Finance, draining nearly 15% of its funds. a readily available for intervention.

The figure was lower than the 3.6 trillion yen estimated by Tokyo money market brokers for Japan’s first intervention in selling dollars and buying yen in 24 years to stem the sharp weakening of the currency.

It is widely believed that the ministry’s figure, showing total spending for the cash response from August 30 to September 28, was fully utilized for the September 22 response. It would exceed the previous record for intervention of selling dollars and buying yen in 1998 by 2.62 trillion yen. Confirmation of expenditure dates will be released in November.

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“It was a big flurry of interventions, if it had happened in a single day, underscoring the Japanese authorities’ determination to defend the yen,” said Daisaku Ueno, chief forex strategist at Mitsubishi UFJ. Morgan Stanley Securities.

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

The intervention, carried out after the yen fell to a low of nearly 146 to the dollar in 24 years, triggered a sharp rebound of more than 5 yen to the dollar from that low, although the currency has since back down to around 144.25.

“The recent sharp and one-sided declines in the yen are increasing uncertainty by making it difficult for companies to make business plans. It is therefore undesirable and bad for the economy,” the Governor of the Bank of the duke said on Friday. Japan, Haruhiko Kuroda, in a meeting with cabinet ministers. .

Japan held about $1.3 trillion in reserves, the second largest after China, of which $135.5 billion was held in deposits with foreign central banks and the Bank for International Settlements (BIS), according to data on foreign exchange reserves released on September 7. These deposits can easily be exploited to fund further dollar sales and yen purchases.

“Even if it were to step in again, Japan probably won’t have to sell US Treasuries and mine this deposit just yet,” said Izuru Kato, chief economist at Totan Research, a think tank. of a large monetary group. market brokerage company in Tokyo.

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

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

Other assets include gold, International Monetary Fund (IMF) reserves and IMF Special Drawing Rights (SDRs), although obtaining dollar funds from these assets takes time, analysts say. .

($1 = 144.4000 yen)

(This story corrects to add deleted 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

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