Japan spent nearly $20.0 billion to support the yen

  • Almost 15% of the funds immediately available for intervention are wasted
  • Japan may avoid selling US Treasury bills for now – analysts
  • And the impact of the intervention may be reduced – researchers

TOKYO, Sept 30 (Reuters) – Japan spent up to 2.8 trillion yen ($19.7 billion) in the foreign exchange market last week, wasting nearly 15% of its funds to prop up the yen, finance ministry data showed on Friday. Available immediately for intervention.

The figure was more than the 3.6 trillion yen estimate by Tokyo money market brokers and would be Japan’s first dollar-selling, yen-buying intervention to stem the currency’s sharpest weakness in 24 years.

The ministry’s figure indicating the total expenditure on currency intervention from August 30 to September 28 is widely believed to have been applied entirely to the September 22 intervention. This would break the previous record for yen buying intervention, which was 2.62 trillion yen in dollar sales in 1998. Confirmation of expenditure dates will be published in November.

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“Had it happened overnight, it would have been a major intervention underlining the Japanese authorities’ determination to defend the yen,” said Daisaku Ueno, chief foreign exchange strategist at Mitsubishi UFJ Morgan Stanley Securities.

“But unless Japan intervenes alone, the impact of further intervention will be reduced,” he said.

The intervention, which came after the yen fell to a 24-year low of 146 to the dollar, prompted a sharp bounce of more than 5 yen to the dollar from that low, although the currency has since rebounded to around 144.25.

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“The recent sharp, one-sided yen decline increases uncertainty by making it difficult for companies to set business plans. It is therefore undesirable and bad for the economy,” Bank Governor Haruhiko Kuroda was quoted as saying at a meeting with cabinet ministers on Friday. .

Japan held about $1.3 trillion in reserves, the second largest after China, including $135.5 billion in deposits held at foreign central banks and the Bank for International Settlements (BIS), according to foreign reserves data released on Sept. 7. A dollar-selling, yen-buying intervention can easily be tapped to fund.

“Even if it intervenes again, Japan may not need to sell U.S. Treasury bills and instead tap these deposits for the time being,” said Isuru Kato, chief economist at Toten Research, a big-money think tank. A market brokerage firm in Tokyo.

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

Among the main types of foreign assets held by Japan, deposits and bonds are highly liquid and readily convertible to cash.

Other holdings include gold, International Monetary Fund (IMF) and IMF Special Drawing Rights (SDRs), though buying dollar funds from these assets will take time, analysts say.

($1 = 144.4000 yen)

(This story adds the omitted word ‘to’ in the first paragraph)

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Report by Laika Kihara and Tetsushi Kajimoto; Editing by Sam Holmes, Edmund Claman & Sri Navaratnam

Our Standards: Thomson Reuters Trust Principles.

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