Surprise! Japan intervened in the forex market three times this summer, selling a record 154 trillion yen in three days

According to information obtained by Zhichong Finance APP, Japan has confirmed that it intervened in the foreign exchange market three times this summer, buying yen to support the exchange rate, corroborating previous market reports. This includes the first coordinated intervention with the United States in nearly thirty years to support the yen.

On Monday, the Japanese Ministry of Finance released daily intervention data for the last quarter, showing that this intervention lasted a total of three days, which surprised traders who had initially expected only two days of action. On July 30, Japan purchased 7.98 trillion yen (equivalent to $50.4 billion) in a single day, setting a new record for one-day intervention; in the subsequent two days, it injected an additional 5.55 trillion yen and 1.87 trillion yen, respectively.

The total intervention over the three days amounted to 15.4 trillion yen, marking the highest monthly amount Japan has ever spent buying foreign exchange to support the yen. It was previously confirmed by Japan and the United States that on July 31 they jointly intervened, which was the first coordinated effort by the two countries to support the yen since 1998.

This rare joint intervention with the United States had a significant initial impact on the market. US Treasury Secretary Scott Besant and Japanese Finance Minister Kaoru Katayama stated that the intervention aimed to curb disorderly exchange rate fluctuations, and indicated that they were ready to act again if necessary.

The joint intervention once led some market participants to believe that the long-term weakening trend of the yen might come to an end. The yen rebounded to as high as 152.89 per US dollar in early September, but subsequently gave back much of those gains; on Monday morning in Tokyo, the yen was trading near 158.30 per US dollar.

The data released on Monday also confirmed that July 30 was a unilateral intervention by Japan, coinciding with the day before the Bank of Japan's monetary policy decision. This timing differed significantly from previous practices, and was interpreted by the market as Kaoru Katayama and foreign exchange chief Jun Mimura testing a new strategy to catch traders off guard. In past interventions (including those during Golden Week), action usually followed Bank of Japan decisions or the release of important economic data.

Earlier related data show that to raise funds for the summer interventions, Japan most likely sold some overseas securities, including US Treasury bonds. Additional data from the Ministry of Finance released Monday showed that, as of the end of October, Japan's overseas securities holdings stood at $835 billion, a slight increase from the previous month.

However, this level of holdings does not entirely represent the reserves Japan can use for future interventions. Following the coordinated intervention, it has been confirmed that Japan can use the Federal Reserve’s Foreign and International Monetary Authorities Repurchase Agreement Facility (FIMA Repo Facility) to obtain dollar liquidity, eliminating the need to directly sell US Treasury bonds. This refuted the views of some traders who previously believed that Besant’s opposition to the sale of US bonds would limit Japan's intervention capacity.

This three-day intervention took place less than three months after the record-setting action during Golden Week. At that time, Japanese authorities also made large-scale market purchases, but the yen remained under pressure and the market increasingly bet that the US-Japan interest rate differential would continue to widen.

Since the joint intervention, both the US and Japan have repeatedly warned speculators. Kaoru Katayama stressed that the authorities’ stance has not changed and that they will take strong action decisively if necessary.

Senior officials also sent similar signals. US President Trump and Japanese Prime Minister Sanae Takaichi, at the September summit, jointly expressed concern over the yen’s weakness, indicating they do not wish to see the yen depreciate further.