The foreign exchange intervention, which is believed to have taken place over the weekend of July 18 and last week, has shown many different options, such as supporting the trend towards a stronger yen, and market participants are looking for a strategy that does not is. leave no room for speculation Taken among The photo was taken on the 12th in front of the dollar/yen exchange board in Tokyo, showing sudden price movements (2024, Reuters/Issei Kato)
TOKYO (Reuters) – The foreign exchange intervention believed to have taken place over the weekend has shown a variety of options, such as supporting the appreciation of the yen, and is calling for strategies and markets that leave no room for speculation. participants. Dollar selling/yen buying in the last three months from the end of April is expected to exceed 2% of gross domestic product (GDP), which could help put an end to the “resource constraint theory” floating around in some quarters.
“It would be very serious if the speculation were to weaken the yen, raise import prices, and put people’s lives at risk.”On the 12th, Finance Minister Masato Kanda made a statement saying that the problem current depreciation of the yen, let alone whether there would be any intervention.
According to the materials released by the Bank of Japan, it is assumed that both the government and the Bank of Japan have decided to intervene in foreign exchange on the 11th and 12th. The Ministry of Finance will announce at the end of this month whether the intervention actually implemented.
What surprised the market was that timing focused on accelerating the movement of the yen to cover the appreciation of the yen, rather than the rapid depreciation of the yen” (Yujiro Goto, chief foreign exchange strategist at Nomura Securities ). That’s what the participants said together.
“It is true that there are speculative movements behind the depreciation of the yen, but there were no excessive movements immediately before the intervention. In response to growing concerns about the yen’s level of depreciation, rather than stopping the yen’s depreciation, “it was an intervention that proposed a resolution to boost the economy,” recalls Tsuyoshi Ueno, senior economist at the Nissay Research Institute.
Another aspect of this situation is that a cross rate check is said to have been carried out not only against the dollar but also against the yen.
“There was a tendency to avoid the dollar-yen currency, where there was a strong sense of intervention, and instead shift the focus of speculation to the cross-yen. The authorities said this was unacceptable, and that there was a variety Responses could be given.
It is estimated that more than 5 trillion dollar sell/buy yen interventions were made on the 11th and 12th, and when combined with the amount of intervention over the long holidays preceding this intervention (about 9.8 trillion yen ), the amount reached 15 trillion yen. This represents 2.7% of the latest real GDP of 554.7 trillion yen in the period January-March 2024, and 2.5% in nominal terms (597.4 trillion yen).
The US Treasury sets a level of 2% of GDP as one of the criteria for classifying a country as a “currency manipulator,” and it is said to be an “internationally recognized level” (market participants).
However, it is said that the 2% standard set by the US authorities is aimed at reducing profits from the devaluation of the country’s currency, and that it is not intended to intervene in the form of “selling foreign currency.” In SA, one of the criteria for designating a country as a currency manipulator is not only the scale of intervention as a percentage of GDP, but also intervention for eight or more months out of the last 12 months. About a year and a half has passed since the foreign exchange intervention in the fall of 2022, and although good relations between Japan and the United States have been established, says a former senior Treasury official, “It is difficult to imagine that this intervention. it will bring Japan closer to being designated as a currency manipulator.”
Another OB says, “It is easier to understand (interventions aimed at) correcting the depreciation of the yen than it is to oppose the appreciation of the yen,” which seems to justify further intervention in the future.
As some people in the market were still of the opinion that there were restrictions on interventions that exceeded 2% of GDP, “the increase in scale may involve corrections of market misconceptions.”(Daiwa Securities) The Mr. Ishizuki).
In an interview with Kyodo News on the 17th, Finance Minister Kanda said, “If there are excessive fluctuations due to speculation, I will have no choice but to respond appropriately,” indicating that he will continue to intervene in rates foreign exchange.
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