Japan’s government is stepping up warnings about the yen’s weakness and hinted at possible intervention in the currency market. Officials expressed concern about recent yen moves being “out of line with fundamentals” and highlighted the risk of excessive volatility.
Data from the Bank of Japan (BOJ) suggests Japan may have spent up to $22.4 billion to intervene and prop up the yen. This action likely followed the yen’s surge on Thursday, driven by expectations of a US interest rate cut.
The Nikkei newspaper reported that the BOJ conducted rate checks with banks, a potential precursor to intervention. However, the finance minister declined to confirm this.
Japan has intervened in the currency market before, spending $61 billion in late April and early May to defend the 160 yen mark against the dollar. However, some analysts question the effectiveness of intervention in reversing the yen’s weakness, arguing that fundamental factors like interest rate differentials play a bigger role.