TOKYO, Aug 4 - Bank of Japan figures released around midweek indicate Japan may not have mounted an intervention in the foreign exchange market on Monday, despite a rapid appreciation of the yen that had traders positioned for another official operation.
The BOJ's projection for money market conditions for Wednesday pointed to a shortfall of 3.38 trillion yen, noticeably higher than brokerage forecasts, which ranged between 2.32 trillion and 2.6 trillion yen. Separately, data for Tuesday did not show a marked outflow from the central bank's current account balances. Market observers commonly interpret outsized outflows from those balances as a sign of intervention and as indicative of the scale of any such action.
The yen outpaced the dollar in the Asian morning on Monday, climbing to 155.20 per dollar - its strongest level in roughly three months - and prompting heightened vigilance among traders for further official involvement. That move followed a confirmation from Japan's finance ministry that it had taken part in a joint yen-buying intervention with the United States on Friday.
Bank of Japan data released on Monday suggested Tokyo may have spent as much as $36.58 billion to buy yen as part of efforts to strengthen the currency. That disclosed figure came after Friday's joint operation, which itself followed a Tokyo solo intervention reportedly worth up to $.58.97 billion in New York markets a day earlier.
Taken together, the money-market projection and the absent large outflow in central bank account balances left room for a range of interpretations, with the published BOJ numbers not providing clear-cut evidence of a fresh intervention on Monday despite the yen's sudden leap.
Key points
- BOJ money-market projection for Wednesday showed a 3.38 trillion yen shortfall versus brokerage forecasts of 2.32-2.6 trillion yen.
- Tuesday's central bank current account balances did not reflect a large outflow, which is often taken as a sign of intervention magnitude.
- The yen surged to 155.20 per dollar in the Asian session on Monday after the finance ministry confirmed a joint yen-buying intervention with the United States on Friday; BOJ data indicated Tokyo may have spent up to $36.58 billion on yen purchases.
Risks and uncertainties
- Ambiguity in BOJ data - The divergence between the BOJ's money-market projection and brokerage forecasts leaves uncertainty about the presence and scale of any Monday intervention.
- Incomplete signal from account flows - The lack of a large recorded outflow in central bank account balances for Tuesday complicates efforts to confirm whether official currency operations occurred and, if so, their magnitude.
- Market sensitivity - Rapid yen moves and recent confirmed interventions create conditions for continued volatility in the foreign exchange market, keeping currency traders and policymakers on alert.
Exchange-rate reference
The reporting included an exchange-rate reference of $1 = 157.8500 yen.