Japan's currency intervention cost $19 billion
The finance ministry data showed that Japan's currency intervention last week cost 2.84 trillion yen $19 billion, the largest amount spent to stem the yen's slide against the U.S. dollar.
The yen-buying dollar-selling operation, Japan's first since 1998, was carried out on September 22, shortly after the Japanese currency plunged past the psychologically important 145 mark amid fears that the monetary policies of Japan and the United States would further diverge.
Friday's data covers the period between Aug. 30 and Sept. 28, and no daily breakdown was disclosed. The largest amount of money was spent on April 10, 1998, and was 2.62 trillion yen.
Market analysts doubt that such direct intervention will have a lasting impact at a time when the dollar is broadly strong against its counterparts supported by higher U.S. Treasury yields.
Finance Minister Shunichi Suzuki said that the rare intervention was intended to correct speculative moves in the currency market, and that Japan will take further steps if needed as currency movements should be stable, not rapid and one-sided. Japan had about $1.29 trillion in foreign currency reserves, which included securities and deposits at the end of August. There were approximately $136 billion in deposits that were seen as ready for immediate use in carrying out the intervention.
The dollar fell by 5 yen into the 140 yen zone after the intervention. It has rebounded since then and was trading below the 145 yen line on Friday.
The yen's rapid-paced depreciation against the dollar has raised alarm among Japanese authorities, and Bank of Japan Governor Haruhiko Kuroda has said volatile yen movements are negative for the economy. A weak yen inflates import costs of energy, food and other raw materials for resource-poor Japan.
Tatsuo Yamasaki, who served as the country's top currency diplomat between 2014 and 2015, said the intervention has proven effective in curbing excessive volatility in the market, getting across the message that Japanese authorities won't tolerate rapid fluctuations.
If speculators get the wrong idea that there will be no more intervention and the yen starts a rapid fall, authorities will likely step in again, Yamasaki told Kyodo News.
Market participants say that direct intervention can't reverse the trend, especially if it is carried out unilaterally by Japan without the United States or Europe.
Yamasaki, a former vice- finance minister for international affairs, said that coordination is extremely rare, something that takes place once in decades. The easiest way is to gain understanding from other nations and step into the market alone. The Group of Seven advanced economies have maintained that excesses of volatility and disorderly movements in the currency market threaten economic and financial stability.
The BOJ has stuck to its ultralow rate policy because of the global tide of monetary tightening. It looks set to keep its dovish stance for the time being, a factor that has driven the yen to its lowest level in 24 years against the dollar.
The U.S. Federal Reserve has entered a rate-hike cycle with more increases expected to tame soaring inflation.
Japan stepped into the market by selling the yen for dollars in the aftermath of the 2011 earthquake and tsunami that caused meltdowns at the Fukushima Daiichi nuclear power plant.
The yen's strength was a problem for the country after it appreciated to around 75 to the dollar at the time. On October 31, 2011, the biggest dollar-buying intervention of 8.07 trillion yen was conducted.