Japanese Ministry Spends JPY 3.66 Trillion to Combat Dropping Currency Value

Japanese officials appear to have intervened significantly in the currency market, as data from the Bank of Japan suggests they spent approximately 3.66 trillion yen ($23.59 billion) on Wednesday alone. This action follows an earlier intervention on Monday, where it's estimated that the Ministry of Finance spent around 6 trillion yen to support the yen after it hit its lowest level against the dollar in nearly 34 years.

Despite these interventions, the yen's value experienced fluctuations. On Wednesday, it traded around 157.55 per dollar before suddenly spiking, strengthening to as high as 153 over the following half-hour period. The Ministry of Finance has refrained from confirming whether it was behind these rallies, reiterating its readiness to intervene as needed to prevent disorderly market movements.

With currency trades taking two business days to settle and public holidays approaching in Japan on May 6 and May 7, the situation remains dynamic. The Bank of Japan's projection for money market conditions on May 8 suggests a net receipt of funds totaling 4.36 trillion yen. This contrasts with estimates from money market brokerages, which exclude intervention-related factors and range from 700 billion to 1.1 trillion yen.

Shoki Omori, chief Japan desk strategist at Mizuho Securities, highlighted the significant magnitude of the intervention, particularly given the short timeframe within which it occurred, spanning two apparent rounds of intervention over the week.