By Tetsushi Kajimoto
TOKYO (Reuters) – Japan will announce on Monday that it has spent what was likely a record amount on currency interventions this month to prop up the yen, with market participants keen to know how much authorities could step in to ease the sharp rise in the yen. to fall.
A compilation of estimates by Tokyo money market brokers says Japan likely spent a record 5.4 trillion yen ($24.9 billion) on two consecutive trading days of unannounced intervention on May 21 and October 24, in reaction to a sharp drop in the yen to a 32-year low of 151.94 to the dollar on October 21.
That would be nearly double the 2.8 trillion yen Tokyo spent last month on its first yen-buying and dollar-selling intervention in more than two decades.
The latest intervention helped trigger an immediate drop in the dollar over 7 yen, but the Japanese currency has since come under renewed pressure.
With strong consumer spending data in the United States, drawing attention to persistent inflation and dampening expectations of a slowdown in interest rate hikes by the Federal Reserve, while the Bank of Japan remains Tethered to ultra-low interest rates, the dollar rose again on Monday, rising 0.44% to 148.08 yen.
Data on Japan’s monetary interventions, including monthly totals released towards the end of each month and daily spending released in quarterly reports, are being watched closely for clues as to how much Japan might be willing to spend in its forays. on the foreign exchange market.
The Ministry of Finance will announce at 7:00 p.m. (1000 GMT) on Monday the total amount spent on the intervention from September 29 to October 27.
Monday’s figures will come under closer scrutiny after the Finance Ministry refrained from commenting on its apparent actions in the market this month, taking a stealth approach to intervention. He confirmed last month’s yen buying action immediately after it occurred.
But while the markets are keen to examine how much Japan is prepared to commit to intervention, there is no doubt that – at least for the foreseeable future – it has sufficient resources to continue entering the market.
Indeed, Japan’s top monetary diplomat, Masato Kanda, said there was no limit to the authorities’ resources to carry out an intervention.
Japan held about $1.2 trillion in foreign exchange reserves at the end of September, the second largest after China, of which about a tenth is held in deposits with foreign central banks and the Bank of China. international settlements and can be easily exploited for the sale of dollars. , yen buying intervention.
Additionally, four-fifths of Japan’s total foreign exchange reserves are held in the form of US Treasuries, purchased during episodes of dollar buying intervention as the yen rose. These can easily be converted into cash.
Other assets include gold, International Monetary Fund (IMF) reserves and IMF Special Drawing Rights (SDRs), although obtaining dollar funds from these assets takes time, officials say. of the ministry.
(Reporting by Tetsushi Kajimoto; Editing by Edmund Klamann)