By Rocky Swift
TOKYO, Jan 30 (Reuters) – Japan refrained from intervening in currency markets through last week, official data showed on Friday, confirming that the government’s efforts to defend the yen have been limited to verbal warnings.
Ministry of Finance data showed Japan spent no funds on intervention from December 29 through January 28. On January 23 after a decision by the Bank of Japan, the yen mysteriously jumped 1.7% after trading near an 18-month low against the dollar.
The yen rallied for two more days after that on reports of rate checks, a common precursor to intervention, from finance officials in Tokyo and Washington, suggesting a rare instance of coordinated action to bolster Japan’s currency.
But money market data from the Bank of Japan this week did not show the typical massive outflows that occur when the government steps into the currency market.
Finance Minister Satsuki Katayama and top currency diplomat Atsushi Mimura have declined to comment on the reported rate checks, with the latter saying Japan would maintain close coordination with the United States on foreign exchange and act appropriately.
The yen trimmed its weekly advance on Friday, sliding 0.5% to 153.79 per dollar.
Japanese authorities have typically refrained from confirming intervention, while warning that they stand ready to counter one-sided, speculative currency moves. Tokyo still has plenty of firepower to act, with foreign currency reserves standing at $1.16 trillion as of December.
“History tells you that intervention is only a temporary solution to a weaker currency,” said Rodrigo Catril, a currency strategist at National Australia Bank in Sydney. “There are real and fundamental arguments as to why the yen is where it’s at.”
The yen’s protracted decline and a recent surge in Japanese government bond (JGB) yields to record levels are manifesting investor concern about the nation’s strained finances. The volatility comes at a delicate time, with Prime Minister Sanae Takaichi seeking a mandate for her mission to reflate the economy at a snap election on February 8.
The nation’s most recent bouts of currency market intervention came in 2024, when the government spent a record 15.3 trillion yen ($99.43 billion) to prop up the yen as monetary policy diverged sharply between the Federal Reserve and BOJ.
($1 = 153.8800 yen)
(Reporting by Rocky Swift; Editing by Sam Holmes)
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