- Intervention drains nearly 15% of readily available resources
- Japan may avoid selling US Treasury bills for now – analysts
- The impact of further interventions may wear off – analysts
TOKYO, Sept 30 (Portal) – Japan spent up to 2.8 trillion yen ($19.7 billion) in foreign exchange interventions last week to prop up the yen, Treasury Department data showed on Friday. whereby almost 15% of the funds have been withdrawn is ready for intervention.
The figure was below the 3.6 trillion yen estimated by Tokyo money market brokers for Japan’s first dollar-selling and yen-buying intervention in 24 years to stem the currency’s sharp weakness.
It is widely believed that the ministry’s figure, which shows the total expenditure for the currency intervention from August 30 to September 28, was used entirely for the September 22 intervention. It would surpass the previous record for dollar sales and yen purchases set in 1998 of 2.62 trillion yen. Confirmation of spending dates will be released in November.
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“This was a big bout of intervention if it 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 alone,” he said.
The intervention, implemented after the yen fell to a 24-year low of nearly 146 against the dollar, sparked a sharp rebound of more than 5 yen per dollar from that low, although the currency has since recovered to around 144, 25 has fallen.
“The yen’s recent sharp, one-sided decline is increasing uncertainty by making it harder for companies to formulate business plans. He is therefore undesirable and bad for the economy,” Bank of Japan 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, of which $135.5 billion was held in deposits with foreign central banks and the Bank for International Settlements (BIS), according to data released Sept. 7 foreign exchange reserves. These deposits can easily be tapped to fund further dollar selling and yen buying.
“Even if it were to intervene again, Japan likely won’t sell US Treasury bills for now and will have to tap this deposit instead,” said Izuru Kato, chief economist at Totan Research, a think tank at a big-money Tokyo-based markets brokerage firm.
If deposits dried up, Japan would have to replenish its securities holdings of around $1.04 trillion.
Of the major types of foreign assets held by Japan, deposits and securities are the most liquid and readily convertible to cash.
Other holdings include gold, International Monetary Fund (IMF) reserves and IMF Special Drawing Rights (SDRs), although raising dollar funds from these assets would take time, analysts say.
($1 = 144.4000 yen)
(Corrected this story to add the omitted word “to” in the first paragraph.)
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Reporting by Leika Kihara and Tetsushi Kajimoto; Edited by Sam Holmes, Edmund Klamann & Shri Navaratnam
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