A Closer Look
On April 29, 2023, the Japanese yen fell to its lowest level against the US dollar in 34 years, reaching the 160-yen mark. This decline prompted speculation of a government intervention to stabilize the currency.
Market players estimate that the Japanese government spent around 5 trillion yen ($31.7 billion) on April 29 to prevent the yen from further depreciation. This intervention involved buying yen and selling dollars, halting the sharp decline in the currency.
The Bank of Japan (BOJ) acts as the government's agent in foreign exchange interventions. The BOJ's current account balance reflects these interventions, and a significant decrease in this balance often indicates intervention activity.
On April 30, the BOJ released its forecast for the May 1 final amount, showing a decrease of 7.56 trillion yen in the "fiscal and other factors" category, which includes interventions. This decrease, significantly higher than the earlier estimate of 2.05 trillion yen by Central Tanshi Co., suggests an intervention of around 5.5 trillion yen on April 29.
The Finance Ministry has not officially confirmed the intervention, but the evidence strongly suggests its involvement. The ministry is expected to announce its decision at the end of May.
The yen's value remains volatile, trading at 156.85-87 against the dollar at the close of Tokyo markets on April 30. This represents a 15 yen depreciation compared to April 26.
The government's intervention highlights its commitment to managing the yen's exchange rate and preventing excessive volatility. However, the long-term impact of this intervention remains uncertain, and the yen's future trajectory depends on various factors, including global economic conditions and monetary policies.