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(Bloomberg) — Japan said it stepped into the foreign exchange market twice last quarter, as speculation grows that more moves may be brewing given the recent bout of renewed yen weakness.
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The Ministry of Finance intervened on July 11 and 12, spending ¥3.17 trillion ($20.7 billion) and ¥2.37 trillion respectively to prop up the yen, according to the daily breakdown data for the quarter ended September released Friday. Before the government took action in July the yen was trading past 160 per dollar, a 38-year low, partly driven by speculators betting on the wide borrowing cost gap between Japan and the US.
Friday’s report also confirmed that no additional smoothing operations were carried out beyond those two dates. Earlier Bloomberg analysis suggested the government likely sold US Treasuries to finance a large portion of the actions.
Japanese authorities have stayed out of the market since then, as the yen gained some ground against the dollar amid a narrowing of interest rate differentials between Japan and other nations. On July 31 the Bank of Japan hiked its benchmark rate to 0.25%, while the Federal Reserve and other major central banks have pivoted toward cutting rates to shore up their economies.
But following Donald Trump’s victory in the US presidential election Tuesday, the greenback has surged against a range of currencies around the world, and the yen is once again at risk of further softening. On Friday it was trading around 153 to the dollar, near the weakest it has been since July.
Wall Street is betting that Trump’s presidency could result in policies that strengthen the dollar, as tariffs on US trade partners and tax cuts at home could drive inflation and higher interest rates. But considerable uncertainty remains surrounding Trump’s various policies and its potential impact on currency trends.
Some economists suggest that under a Trump administration starting January, Japan may find it easier to persuade the US that currency interventions are necessary, given the president-elect has spoken in favor of a weaker dollar in the past.
“Trump’s stance might be ‘well done on intervening’ if Japan stops yen weakness,” said Atsushi Takeuchi, Chief Research Fellow at Ricoh Institute of Sustainability and Business. “From his perspective, the US doesn’t have to spend anything — the Japanese are doing it for him.”