By Max Sato
(MaceNews) – Japan’s yen-buying operation conducted on Sept. 22 to keep lopsided market forces from weakening the yen further against the dollar, totaled a large Y2.838 trillion ($20.3 billion), according to monthly data released Friday by the Ministry of Finance for the period from August 30 through September 28.
The intervention, the first in about 24 years, is estimated to be Tokyo’s biggest single-day operation to buy yen for the U.S. unit since April 10, 1998, when Japan spent Y2.62 trillion ($18.7 billion).
MOF officials have declined to disclose exactly what time they took action and at what dollar/yen levels, but judging from the timings of verbal warnings in the afternoon of Sept. 22 and a sharp market reaction later, it is believed to have taken place at around 1700 JST (0800 GMT/0400 EDT) at the end of Tokyo trading hours and the start of London dealings.
The intervention prompted the dollar to slip back to just above Y140 from Y145.90 on Sept. 22, but it is uncertain how long its effect will last as there is no indication that the U.S. joined the dollar-selling operation and the Federal Reserve’s aggressive tightening has been attracting investors to dollar assets. Dollar-yen was back at Y144.50 on Friday.
Vice Finance Minister for International Affairs Masato Kanda told reporters shortly after the intervention that the MOF is keeping in close contact with its counterparts in other countries 24/7, and that Japanese weekends and holidays would not deter the MOF’s operation team from taking action if needed.
Kanda denied that the MOF drew a line in the sand as market participants speculated that the government was trying to defend the Y145 level to the dollar.
“Basically, it is the volatility (that matters),” he said. “We consider many things, such as how large fluctuations are relevant to other issues and whether what’s behind the move is reasonable, but we are not giving any thoughts to levels.”
In the past, other MOF officials, who were involved in mostly yen-selling intervention to stop the Japanese currency from appreciating too fast and hurting exporter profits, said they were looking at both the pace and levels of forex moves.
The “decisive action” taken on Sept. 22 was the first Japanese intervention to protect the value of the yen since June 17, 1998, when the Ministry of Finance won support of the U.S. Treasury Department to conduct a joint forex intervention, sending the dollar sharply down to Y142 during Tokyo trading hours and to Y136 in New York from above Y146 two days earlier. Tokyo spent Y231.2 billion ($1.65 billion) on that day while Washington is estimated to have spent $833 million.