The market is focusing on the current state of government intervention, which is deploying massive foreign-exchange reserves to keep the yen in the ¥160-per-dollar range, and the outlook for continued intervention.
Massive foreign-exchange reserves were deployed in the latest currency intervention to bring the yen back to the ¥160-per-dollar range. The intervention was conducted in late April and early May in the name of the Ministry of Finance, totaling ¥11.7 trillion, reportedly an all-time high. It is reported to have pushed the yen back in the short term.
¥160 per dollar is regarded as an unofficial milestone, and the government is said to be likely to intervene in the market again if the yen moves below that level. The yen recovered to around ¥155 per dollar after the intervention but subsequently returned to a downward trend.
Japan currently relies on imports for approximately 90% of its energy, and it has been suggested that the structure of the country’s energy supply and demand, as well as trends in energy markets, are putting pressure on the foreign-exchange market. As pressure for yen depreciation continues, households are said to be bearing a heavy inflation burden.
Regarding the outlook for future intervention, it has been suggested that the next intervention is likely to be limited to approximately ¥90 billion, with the possibility that it will be reflected in the budget from the next fiscal year onward. Japan’s total reserves currently stand at approximately $1.38 trillion, while its holdings of U.S. Treasuries amount to approximately $1.19 trillion. These assets are said to generate returns.