Possible yen intervention of approximately $22 billion suggested by Japan's data.
- U.S. inflation data caused the Japanese currency to increase by 3% against the dollar on Thursday.
- Analysts speculated that policymakers took advantage of inflation data to enter the market.
- Masato Kanda, the vice minister of finance for international affairs, stated that he could not provide any comment on potential intervention.
The Bank of Japan projected a fresh market on Friday, indicating a possible intervention of approximately $22 billion into the currency markets in an attempt to support the struggling economy.
On Thursday, the Japanese currency experienced a 3% increase against the dollar in response to weak U.S. inflation data. This was the yen's largest daily gain since late 2022, as reported by Reuters. The rise occurred while traders were already anticipating potential currency intervention from Japanese authorities.
The Bank of Japan projected a drain of 3.17 trillion yen ($20 billion) from daily current account balance data on July 16. Markets are closed on Monday, July 15 for a public holiday.
According to news agencies the Nikkei and Reuters, the actual surplus of around 400 billion yen was lower than the earlier forecast, resulting in a surprise 3.57 trillion yen ($22.49 billion) gap in the finances. This gap is believed to have been spent on currency intervention on Thursday, with foreign exchange transactions taking two working days to settle.
Analysts speculated that policymakers took advantage of the U.S. inflation data to enter the market.
The Ministry of Finance's vice minister for international affairs, Masato Kanda, stated that he couldn't provide any comment on potential intervention. A spokesperson for the ministry was not immediately available for comment when contacted by CNBC.
Since the Bank of Japan ended its negative interest rate policy in March, the yen has been facing sustained pressure.
In May 2022, Japan intervened in its currency market for the first time since that year with a $62 billion spending spree. The ministry revealed that Japan had spent 9.7885 trillion yen on currency intervention between April 26 and May 29.
The Japanese currency rebounded against the dollar in the weeks prior, coinciding with a sharp decline in the yen's value. The yen had reached a 34-year low of 160.03 against the U.S. dollar on April 29, but later bounced to 156 levels, sparking speculation of potential intervention by Japanese authorities before it was confirmed.
Shunichi Suzuki, the Japanese Finance Minister, has previously supported the idea of intervention if significant currency fluctuations begin to affect households and businesses.
On Friday, the yen strengthened to trade near 158.5 against the dollar, following a decline to 157 on Thursday.
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