‘Covert’ effort to boost yen sends shock waves through markets

e recent “covert” currency intervention by the Japanese government and the Bank of Japan sent shock waves through markets, as it was conducted without coordination with foreign authorities and came a er the Tokyo market closed and before the weekend in overseas markets, when trading is light.

e yen-buying, dollar-selling intervention to stem the rapid depreciation of the yen was conducted by Japanese authorities from late night of Oct. 21 to early Saturday Japan time.

In the foreign exchange market, the yen soared at one point from nearly ¥152 against the dollar to the low ¥146 range.

Government sources admitted Saturday that Japanese authorities had carried out the intervention, which was done in secret.

It was the second con rmed intervention by Japanese authorities this year in response to the yen’s ongoing depreciation, following one on Sept. 22, and the rst covert intervention since the autumn of 2011.

UNUSUAL TIMING

In the o ce of a Japanese bank in New York, traders were glued to their monitors as the currency market suddenly became volatile and the yen began rapidly rising against the dollar.

e timing of the action was quite unusual. It was about 10:30 a.m., Oct. 21 in New York — 11:30 p.m. in Japan, where trading for the day had long ended. European markets were winding down.

U.S. President Joe Biden had indicated an acceptance of a strong dollar, saying the current state of the U.S. currency did not cause him concern, leading market players to speculate that Japan would

nd it di cult to intervene again in the wake of the Sept. 22 intervention.

Especially in overseas markets, it was believed that although the Japanese government and the Bank of Japan could intervene unilaterally, cooperation from other central banks would be necessary to gather information from market players.

On the other hand, concern about market movements grew stronger at the Finance Ministry a er the yen slipped below ¥150 to the dollar on Oct. 20.

“We are no longer in a situation where we can allow such

uctuations, which are more excessive than ever,” Masato Kanda, vice nance minister for international a airs, told reporters on the night of Oct. 20.

At 5 p.m., Oct. 21, trading in the Tokyo market largely ended, and the yen was sitting in the ¥150 range. But about four hours later, its value fell by more than ¥1 due to currency manipulation in the form of an intervention.

e yen eventually rose to the low ¥146 range, but weakened back to the upper ¥147 range when trading ended in the New York market on Oct. 21.

“e yen will quickly return to a weaker position at the beginning of the week when trading picks up,” said Toru Sasaki, head of market research at JPMorgan Chase Bank.

e government and Bank of Japan spent ¥2.8382 trillion in their market intervention on Sept. 22, the largest ever for a single day. However, it took less than a month for the yen to become weaker than it was before the intervention.

In response to the recent yen depreciation, the government is apparently prepared to intervene repeatedly if the currency

uctuates excessively, with the Foreign Ministry’s Kanda saying funds for such actions are “unlimited.” (Oct. 24)