Focus: Warning of foreign exchange intervention during holidays; decline in trading may prompt re-movement; Will US authorities gracefully acquiesce? | Reuters

TOKYO (Reuters) – The foreign exchange market surpassed the milestone of 155 yen to the dollar on the 24th, further raising concerns about dollar-selling/yen-buying intervention. During the holidays, there are fewer main players in the Tokyo market, which tends to lead to sudden movements. Some in the market believe that even if the government and the Bank of Japan decide to intervene, the U.S. authorities will respond with nine-nine neglect (graceful silence).

“Currency intervention is a one-shot $1 million dollar deal.” Regarding foreign exchange intervention, Kohei Otsuka (National Democratic Party) said the following at the House of Councilors Finance and Finance Committee on the 25th.

Commissioner Otsuka said, “Starting next week, the minister will be traveling on business,” adding, “We need to give administrative staff an allowance to spend up to 500 books ($500 million, approximately 77.5 billion yen at 155 yen conversion). “By the time Golden Week begins, the price will be 165 yen, which could lead to another debate here.”

Finance Minister Suzuki will attend the Asian Development Bank (ADB) annual general meeting scheduled for early May. In conjunction with the annual general meeting, they plan to participate in the customary meeting of finance ministers and central bank governors, which also includes the three countries, China, South Korea, and ASEAN (Association of Southeast Asian Nations). At a press conference after the Cabinet meeting on the 23rd, Finance Minister Suzuki said that he was “arranging to attend” these meetings.

The fiscal authorities have maintained their position that “appropriate measures can be taken anywhere,” but if the view that this is a window of opportunity spreads, it could provoke speculative yen selling.

In response to opposition parties’ voices stirring up a sense of crisis, Finance Minister Suzuki declined, saying, “I hope you understand that I can’t say much in the current situation,” and added, “We are paying close attention to the market right now. There is no change in the way that we will respond appropriately based on the situation.”

Regarding the possibility of live-fire intervention, many megabank executives say, “It could happen at any time.” Now that the price has broken through the psychological milestone of 155 yen, the level of vigilance has further increased.

“It is natural to think that (live-fire intervention) is being put on hold in order to counter the pressure on the yen to depreciate after the Bank of Japan’s monetary policy meeting on the 26th, which is expected to be less hawkish,” said SMBC Nikko Securities. Shin Noji, chief foreign exchange and foreign debt strategist, says:

The PCE deflator (announced on the 26th), which is emphasized by the US Federal Reserve as an inflation indicator, is also attracting attention as the long weekend approaches, when trading in the Tokyo market slows down. “If a disinflationary trend cannot be confirmed and the rate of return exceeds expectations, expectations for a U.S. interest rate cut by the end of this year may be further dwindled,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

The US Federal Open Market Committee (FOMC) is scheduled to meet on April 30th and May 1st during the holidays.

Prior to the further depreciation of the yen, the three countries shared serious concerns about the rapid depreciation of the yen and won at the first Japan-U.S.-Korea finance ministers’ meeting held on the 17th. Since they agreed to “closely discuss” foreign exchange market trends, the market believes that they will be able to gain the understanding of the U.S. authorities even if they decide to intervene with live ammunition, just as they did in the fall of 2022. Some believe that he is a former mega bank executive).

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