Photo/Illutration Japanese banknotes soon to go out of circulation (Reuters)

Japan spent a record 9.7885 trillion yen ($62.2 billion) between April 26 and May 29 to prop up its currency in the foreign exchange market, according to the Finance Ministry.

The money spent on market intervention exceeded even the estimated 9.1 trillion yen used between September and October 2022.

When it feels compelled to act, the Finance Ministry announces its yen market intervention total figure at the end of each month. The daily amounts used to shore up the value of the yen will not be made public until early August, so there is no way of knowing what days had the largest volume of intervention.

But market experts assumed that April 29 and May 2 were pivotal dates because the yen rebounded slightly after moving above 160 yen to the dollar at one point on April 29.

The ministry made its latest announcement on May 31.

The plummeting of the yen was believed triggered by a remark Bank of Japan Governor Kazuo Ueda made at his April 26 news conference. When asked if the weakening of the yen at that stage was within an area that could be ignored, Ueda answered in the affirmative.

Economists had different takes on the latest round of yen intervention.

Teppei Ino, a chief analyst at MUFG Bank, said, “If there was no intervention, the yen might have stayed above 160 yen to the dollar, leaving the door open to a further weakening of the currency. (The intervention) had a certain effect.”

But Tsuyoshi Ueno of the NLI Research Institute said the intervention should have been made earlier.

“If they had moved earlier, the yen would not have weakened as much as it did,” Ueno said. “The volume of the intervention might also have been kept lower.”

Despite the massive intervention, the yen continues to trade at around 157 yen to the dollar, like the level before the intervention.

Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank Ltd., said while the overall trend had not changed the intervention had bought some time for the yen.

Speculators are now on notice that the government and BOJ has set the area between 160 and 157 yen to the dollar as their “defense line” to decide if further intervention is needed, Sera said. That will make it more difficult for speculators to dump their yen.

(This article was written by Sawa Okabayashi and Junichi Kamiyama.)

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