Japan Confirms Record Intervention to Counter Yen Fall

Facts

• On Tuesday, Japan’s Ministry of Finance (MOF) confirmed in its daily operational report for the quarter ending December 2022 that it made record interventions in the foreign exchange market, stepping in three times in 2022 to counter the yen’s more than 20% fall against the dollar.
• The MOF conducted the interventions twice in October in its largest-ever yen-buying operation. Japanese authorities announced their first yen-buying, dollar-selling operation in 25 years on Sept. 22.
• MOF data shows that Japan spent 5.62T yen ($42.5B) on Oct. 21 and 730B yen on Oct. 24, for a total of 6.35T yen ($48B) for the month of October. This came after spending 2.84T yen on Sept. 22.
• Data shows the yen dropped to a 32-year low of 151.94 JPY to the dollar prior to the MOF's intervention in October. Finance Minister Shunichi Suzuki says the interventions were aimed at “countering excessive currency moves driven by speculative trading.”
• Since the interventions, the dollar has returned to its normal range of around 130 yen. Any further rises in the yen, however, could hamper Japanese exports of cars and electronics as a stronger yen makes Japanese goods less competitive.
• While the US hasn't issued any public concerns about Japan’s interventions, the International Monetary Fund says that the effects of foreign exchange interventions are only temporary and should be limited to 'special circumstances,' such as when market moves are disorderly and financial stability is at risk.

Sources: Finance, Kyodo News, Reuters, Nasdaq, Reuters, and Kyodo News+.

Narratives

• Narrative A, as provided by South China Morning Post. Japan has been bucking the global trend, opting for a loose monetary policy amid global inflation, and it's clearly not working. In addition to experiencing rampant inflation, Japan’s yen has also weakened substantially. Japan’s financial leaders must change their policies to improve the country’s economy.
• Narrative B, as provided by Brecorder. A weakened yen isn't necessarily a bad thing, as foreign companies look to import more Japanese goods when the yen is weaker. Japanese companies are seeing big gains in the stock market as exporters, especially in the auto industry, become more competitive and increase sales abroad.