Japan Reportedly Intervened In The Foreign Exchange Market By Purchasing Yen

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Last Updated on October 24, 2022 by Bitfinsider

A government official and another person familiar with the matter told Reuters that Japan made an intervention in the foreign exchange market on Friday to buy yen for the second time in a month. This came after the currency hit a 32-year low near 152 to the dollar, prompting Japan to buy yen for the purchase.

Japan has been making efforts to shore up the battered currency while the central bank continues to stick with ultra-low interest rates. This goes against the global trend of tightening monetary policy and widens the gap between the interest rates in the United States and Japan.

As a result of the intervention, the value of the yen decreased by more than 7 yen, reaching a low of 144.50 yen shortly after the dollar reached its highest point since 1990, which was 151.94 yen. At the time of writing, one dollar was worth 147.34 yen, representing a decrease of 1.8%.

According to one source, the Ministry of Finance (MOF) began to step in at various points beginning at approximately 9:35 p.m. (1235 GMT).

Masato Kanda, the chief currency diplomat for Japan, declined to comment on whether or not the MOF had taken action.

“We won’t comment now on whether or not we conducted an intervention,” Kanda, the vice finance minister for international affairs, told Reuters on Saturday. He added that this was a stance that the MOF has maintained throughout the past few weeks. “We won’t comment now on whether or not we conducted an intervention.”

He said that the ministry would not confirm whether an intervention had taken place for some time yet, indicating that there may have been a “stealth intervention” to engage in a “war of nerves” against investors who were dumping the yen.

On September 22, the Ministry of Finance bought yen as investors focused on the expanding disparity between the Bank of Japan’s ultra-loose monetary policy and the aggressive rate hikes being implemented by the Federal Reserve in the United States.

Both the Minister of Finance, Shunichi Suzuki, and Prime Minister Kanda have made it clear on multiple occasions that the government is prepared to interfere and that they are warning against excessive volatility. Prior to the intervention that took place on Friday, Suzuki stated that the authorities were prepared to act “strictly” against speculators.

Even though Japan has $1.33 trillion in foreign reserves, many market participants are skeptical that Tokyo will be able to halt the depreciation of the yen through unilateral action.

This month, the Group of Seven industrial powers reached a consensus to closely monitor recent volatility, but they refrained from giving any indication that they were ready to intervene together.

According to estimates provided by Tokyo money market brokerage firms, Japan made a record purchase amounting to 24 billion dollars during the action in September.

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