Japan’s Finance Minister Jun Azumi announced today that the government would authorise a further 15 trillion yen ($195 billion) for currency market interventions by the Bank of Japan. This would result in an increase in the fund’s total to record 46 trillion yen.
Azumi added that the government will continue to monitor currency traders’ daily positions for another two months. The finance ministry began closely watching the currency markets since August when yen hit record highs against the dollar.
The yen has held steady against the dollar at around 76-77 yen since the Bank of Japan intervened in the markets on August 4 and bought a record 4.5 trillion yen worth of currencies. However, then Japanese currency continued to strengthen especially against the euro and other Asian currencies.
Meanwhile, the yen is still within striking distance of its all-time high against the dollar, and the Japanese government is very concerned that its exporters are ill equipped to cope with such persistent yen strength.
“The recent 75- to 80-yen range could pour cold water on the Japanese economy’s recovery,” Azumi told reporters, a clear signal that not only sharp market moves, but the very levels at which the yen has been trading was a concern.
The currency market showed little reaction, though, with one traders describing Azumi’s warnings as “posturing.”
Some players said, however, boosting the war chest would serve as a reminder that intervention was a possibility.
“Boosting forex intervention fund is to send the message to the market that Japan will not have immediate trouble if it intervenes,” said Masafumi Yamamoto, chief currency strategist at Barclays Capital.