(Bloomberg) — Yen traders are on watch for signs of further action by Japanese authorities after intervention triggered the currency’s sharpest rally in three years on Thursday.
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Japan likely spent around ¥5.4 trillion, or roughly $34.5 billion, in foreign-exchange markets to prop up the yen, according to a Bloomberg analysis of central bank accounts.
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The yen was steady at around 156.80 per dollar in New York on Friday, after a roughly 2% surge on Thursday that pulled it back from close to its weakest levels in four decades.
While the nation’s top currency official has declined to confirm intervention, a person familiar with the matter said authorities had entered the market for the first time since 2024. Economic officials in the US were notified before the move, according to another person familiar with the matter.
Without additional action, the yen’s intervention-fueled rally is in danger of evaporating, according to traders, who see an increasing likelihood that Japan will have to enter the market again. Although a weaker currency helps Japan’s exports, it also risks faster inflation by making imports — including soaring oil — pricier.
“The chances are they will need to continue to act to support the yen in the longer-term,” said Kathleen Brooks, research director at XTB. “There is a history of failed intervention attempts to support the yen, which suggests that the gains may not last and the dollar could make a comeback.”
An erosion of initial gains in the yen would follow the pattern seen around this time in 2024, when Japan came into the market on several occasions to address weakness. Atsushi Mimura, vice finance minister for international affairs, offered a veiled warning of this to traders on Friday ahead of the May 4-6 Golden Week break in Japan.
“I will not comment on future developments, but I will point out that we are just at the beginning of a long holiday period,” Mimura said. “We are in extremely close contact with the US, and I believe we share our assessments of the situation and our actions.”
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Mimura extended his warning to energy traders, adding that, “generally speaking, we are always ready to act regarding crude oil futures transactions.”
