Japan spent 11.7 trillion yen in one month to support the market! One of the largest currency interventions in recent years.

The Japanese government conducted foreign exchange interventions of record scale over the past month, but the yen has since given back nearly all its gains, fueling doubts about the effectiveness of unilateral intervention.

According to Bloomberg, data released by Japan’s Ministry of Finance on Friday showed that during the period from April 28 to May 27, Japanese authorities spent about 11.73 trillion yen (approximately $73.6 billion) buying yen, aiming to support the currency which was once nearing the 160 yen per dollar mark. This was one of the largest single-month foreign exchange interventions on record, and marked the first intervention by Japan since 2024.

The scale of the intervention exceeded market expectations. Previous reports based on estimates from central bank fund flows put the total outlay for two rounds of intervention at about 10.08 trillion yen, but the actual figure reported was noticeably higher. As of Friday evening, USD/JPY stood at 159.27, almost unchanged from the pre-intervention level of 160.72 on April 30, casting doubt on the effectiveness of the intervention.

Intervention Exceeds Expectations, Hinting at Multiple Hidden Actions

The actual scale of intervention disclosed by the Ministry of Finance was higher than market expectations, sparking speculation about the number and rhythm of operations.

Rinto Maruyama, senior FX and rates strategist at SMBC Nikko Securities, said: “This increases the likelihood that authorities conducted covert interventions in the 158.50–159.50 yen range.” He further noted that even with covert action, the inability to effectively halt yen depreciation may reinforce perceptions about the limitations of unilateral intervention.

Bloomberg, citing sources, reported there was definitely yen-buying intervention on April 30, and further action is suspected in the days that followed. Notably, this intervention occurred two days after the Bank of Japan announced no change in policy on April 28—similar to the situation in April 2024, when the BOJ remained on hold at month-end, causing yen weakness and triggering government intervention.

Interest Rate Differentials Drive Yen, Intervention Hardly Changes Expectations

The persistent weakness of the yen is fundamentally due to the wide US-Japan interest rate differential and inflation concerns triggered by Middle East conflicts. The Bank of Japan will announce its next policy decision on June 16, with markets widely expecting a 25-basis-point rate hike, which might help narrow the rate gap.

However, the Fed’s policy trajectory has made expectations of narrowing the gap more cautious. Renewed global inflation has erased bets on a Fed rate cut this year, with multiple officials warning about rising inflation risks. According to Bloomberg, at last month’s meeting, most Fed officials warned that if inflation continues to run above target, the central bank may need to consider raising rates.

Despite this intervention breaking records, market participants remain skeptical about its effectiveness. Bart Wakabayashi, head of State Street’s Tokyo branch, said: “There was an impact at the time, but I don’t think they fundamentally changed overall market expectations.” He also predicts further interventions are possible. He said: “If the market easily breaks through 160, I think the authorities will take action again.”

The unprecedented intervention highlights the Japanese authorities’ determination to prevent further yen depreciation. However, with US-Japan monetary policy divergence unlikely to reverse in the short term, the lasting effectiveness of unilateral intervention faces severe challenges.

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