As the Japanese yen further falls towards the 160 mark and approaches the low point of the year, the Japanese authorities, who have been completely pushed to the corner, have also had to issue a rare and stern warning in history
Japanese Deputy Minister of Finance, Shinzo Kanda, stated on Monday that the Japanese government is prepared to intervene in the foreign exchange market 24/7 if necessary.
The highest level foreign exchange official in Japan said, "If there is excessive currency volatility, it will have a negative impact on the national economy. Once there is speculative excessive volatility in the Japanese yen, we are prepared to take appropriate action."
Kanda also pointed out that global authorities are interconnected every day on a wide range of issues, including currency fluctuations.
He stated that his American counterparts in Washington have no objections to Japan's intervention actions. For US officials, the most important thing is transparency. The decision by the United States to include Japan on its currency manipulation "watch list" last week has no impact on Japan's exchange rate strategy.
Previously, the US Treasury Department added Japan to the "watchlist" of exchange rate manipulation in its semi annual currency report released last Thursday. In the latest report, the US Treasury Department has targeted Japan's massive bilateral trade and current account surplus, but has not overly criticized its intervention actions in April and May this year.
The US Treasury Department wrote in its semi annual foreign exchange trading report, "The Treasury's expectation is that intervention in large, freely traded foreign exchange markets can only be made in very special circumstances through appropriate prior consultation. Japan is transparent in its foreign exchange business."
In fact, just as Kanda made the latest speech on the same day, the Japanese yen exchange rate has further approached the integer level of 160 yen to the US dollar. Previously, the US dollar against the Japanese yen fell to a more than 30-year low of 160.17 on April 29, which triggered the Japanese authorities' foreign exchange intervention actions.
According to industry statistics, in the two foreign exchange intervention actions at the end of April and early May this year, the Japanese authorities may have spent a record 9.8 trillion yen (approximately 62 billion US dollars) to support the yen. This number has exceeded the total amount spent on its intervention in 2022.
Japan's foreign exchange reserve data also showed that the Japanese authorities were likely to sell some US treasury bond bonds in the second quarter to fund intervention.
In addition to foreign exchange intervention, many industry insiders currently anticipate that the Bank of Japan may also launch a tightening policy combination of "raising interest rates and reducing bond purchases" at its July interest rate meeting.
The Bank of Japan has said in its monetary policy statement this month that it will continue to implement the long-term treasury bond bond purchase policy set in March. Later, in order to further liberalize the long-term interest rate formation mechanism in the financial market, the central bank will reduce the purchase of treasury bond, and at the monetary policy meeting held in July, it decided to reduce the purchase of bonds in the next one to two years.
It is worth mentioning that with the recent sharp decline in the yen increasing the possibility of Japan intervening in the market again, a large number of retail traders seem to be betting that the yen may rebound from its low levels. According to data from the Tokyo Financial Exchange, the bullish position of the yen against the US dollar has been increasing in futures contracts of Japanese individual investors since mid May.
Takuya Kanda, head of analysis at Japanese online brokerage firm Gaitame.com, said that as the yen/dollar exchange rate falls to 160, retail traders are anxiously hoping for authorities to intervene as soon as possible.
Gaitame.com is a Japanese online brokerage firm aimed at individual forex traders.