The Japanese government spent $43 billion to strengthen the yen in October

The Japanese Ministry of Finance intervened to support the value of the yen

Richard A. Brooks

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Japan’s finance ministry said on Monday it spent $43 billion in October to prop up the value of the yen, which this year has fallen against the dollar to levels not seen since the 1990s.

The ministry said it spent 6.35 trillion yen ($43 billion) on forex intervention operations between September 29 and October 27, without giving details on when or how often.

This follows a similar move to sell dollars and buy yen in September that cost 2.8 trillion yen (nearly $20 billion at the time) and was announced by authorities shortly. after.

But the government had so far refused to confirm speculation by traders and analysts of further intervention this month, causing rollercoaster swings in the value of the yen.

The currency fell past 151 to the dollar earlier in October for the first time in 32 years, before rebounding sharply and then gradually falling back.

At the time of Monday’s announcement, one dollar was worth 148 yen – still considerably lower than February levels of around 115.

Behind the fall of the currency hides the contrast between the monetary policies of the American and Japanese central banks.

While the US Federal Reserve fights inflation with aggressive rate hikes, the Bank of Japan sticks to its longstanding monetary easing program designed to encourage sustainable growth.

BoJ Governor Haruhiko Kuroda said on Friday there would be no change “anytime soon” in the bank’s ultra-loose stance.

“Traders want to test the resolve of the Bank of Japan,” Carol Kong, an economist and currency strategist at Commonwealth Bank of Australia, told AFP.

The Japanese government has “a huge amount of money to spend on the intervention”, with more than $1 trillion left in its forex coffers after the September action, she said.

But to cut costs, “they instead used a lot of verbal intervention to try to keep the dollar yen on the weaker side.”

Kuroda and Finance Minister Shunichi Suzuki have repeatedly promised to take strong action against rapid changes in exchange rates.

Besides the impact of government interventions, the yen has also strengthened slightly in recent days as investors expect the Fed to temper its hawkish rate hikes soon, Kong said.

But as long as the Bank of Japan sticks to its guns, the Japanese government’s moves to strengthen the yen can only have a limited effect, Rakuten Securities chief strategist Masayuki Kubota said in a statement. recent comment.

“Intervention cannot stop the depreciation of the yen, but if the fundamentals – the spread between Japanese and US interest rates – change, the fall of the yen will stop,” he wrote.

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