Japan Increased Support For Yen Achieving Record High Intervention

Japan Increased Support For Yen Achieving Record High Intervention

February 13, 2023 0 By Wiley McDermott

The officials from Japan have made shared information about supporting the local currency. They issued a statement on Tuesday, which confirmed that the country had attempted intervention in the year 2022.

Record Intervention in 2022

According to the statement, Japan increased its intervention back in the month of October 2022. They had hit record high intervention in the particular month.

The Ministry of Finance (MOF) of Japan reportedly shared information about the intervention they carried out in October 2022.

They confirmed that they had intervened in the forex market by flushing out $48 billion. The mentioned figure translates to 6.35 trillion yen.

By flushing out dollars into the forex market, Japan was able to lower the demand for the greenback in the global market.

In the forex market, when a currency is sold, the other currency is purchased in its place. Japan had sold the USD/JPY pair, which means that it sold the dollars and purchased the Japanese yen in the process.

As the Japanese yen was purchased, the value of Japan’s local currency ended up getting boosted against the dollar.

What Prompted the MOF to Sell the USD?

It was in the third quarter of 2022 when the US Feds started to increase the interest rates. They had made the attempt to increase the value of the dollar to challenge the rising inflation rates.

Following the Feds’ decision, the trading price of the dollar pumped higher. Just when the trading price of the dollar was getting pushed higher, the value of the yen was getting pulled lower.

The yen recorded a steep drop as the inflation rates continued rising in the country and the fear of recession also increased among the locals.

As the investors stopped investing in the Japanese yen, the value of the currency started to fall. The decline caused the trading price of the yen to fall to a 32-year low against the dollar.

It was on October 21, when the trading price of the yen had fallen to 151.94 against the trading price of the greenback.

The decline did not stop there because the value of the yen continued to record a constant fall. The data shows that the trading price of the Japanese yen continued declining even on October 24.

This is what triggered the Ministry of Finance to make the decision of intervening in the forex market.

IMF Opposed the Intervention

As Japan continued with its intervention, the International Monetary Fund (IMF) opposed the decision that the Ministry of Finance had attempted.

As per the Ministry of Finance, they had proceeded with intervention because they wanted to counter the currency moves that were becoming excessive.

Japan is still monitoring the forex market as it wants to calibrate the result of its intervention. They want to understand the impact of the intervention and they may continue if its outcome is positive.

The officials at the Ministry of Finance are hopeful that the Japanese yen would stabilize in near future. When that happens, it will start reflecting the fundamentals of the economy.

The Japanese Finance Minister, Shunichi Suzuki, made it clear that they are determined to make things right for their economy.

If needed, they will definitely go with intervention again because they have not ruled out the option of intervention.

Initial Interventions by Japan

The initial interventions that the Ministry of Finance attempted in the year 2022 were back in September. The first major intervention attempted by the ministry was back on September 22.

For the first time in 24 years, Japan intervened, selling an enormous amount of dollars to acquire the Japanese yen, thus increasing the yen’s price.

Japan’s October 21 Intervention

It was on October 21, when Japan intervened, spending $42.5 billion. It reportedly flushed out 5.62 trillion yen worth of greenback to bring the dollar’s price lower.

On October 24, Japan had flushed out 730 billion yen worth of dollars in the forex market.