Japan May Have Spent Record in Intervention - Bloomberg

Japan may have spent a record amount intervening to stem the yen’s gains on Aug. 4, based on projection of deposits held by financial institutions at the Bank of Japan.

The central bank estimated that deposits climbed to a total 32.3 trillion yen ($412 billion), it said in a statement released yesterday in Tokyo. The figure suggests that the government sold about 4.5 trillion yen, a record, to prevent the currency from strengthening to a post-World War II high, according to Yuichi Takahashi, market economist at Totan Research Co., a money-market brokerage in Tokyo.

Japan followed Switzerland in seeking to stem appreciating exchange rates this week, selling the yen and pledging to inject 10 trillion yen in liquidity. Japanese Finance Minister Yoshihiko Noda said yesterday he will continue to watch the market, as the currency rebounded from its post-intervention low.

The latest yen sales may herald “an extended period of interventions,” David Rea, Japan economist at Capital Economics Ltd., said from London yesterday. “The intervention hasn’t really made a great deal of difference in the value of the yen because of the underlying factors -- fundamentally risk aversion and safe haven demand.”

The yen was at 78.65 per dollar as of 1:24 p.m. yesterday in London, after falling to as low as 80.24 on Aug. 4. It traded as strong as 76.30 on Aug. 1, nearing the postwar high of 76.25 reached in March after the earthquake and tsunami.

Masaaki Kanno, chief economist at JPMorgan Securities Japan Co., also said in a report yesterday that an intervention amount of about 4.56 trillion yen would be a “good guess,” based on looking at deposits at the Bank of Japan.

In its prior record intervention, Japan sold 2.125 trillion yen on Sept. 15, 2010.
‘Disorderly Movements’

“We intervened to restrain speculative and disorderly movements -- it wasn’t targeted at a level,” Noda told reporters in Tokyo yesterday, adding that officials will continue to take “appropriate” measures when necessary. “We must closely watch the currency market, but with the big drops in the Dow, I’d like to closely monitor the stock market today as well.” Read More