Japan’s Suzuki Flags Intervention Impact As Yen Awaits Fed Meet

(Bloomberg) -- Japan’s intervention in currency markets is having an impact, according to Finance Minister Shunichi Suzuki, speaking a day after official figures showed the country spent a record $42 billion in October to prop up the embattled yen.

The Japanese currency climbed 0.3% to 148.25 per dollar in Tokyo on Tuesday, well off its 32-year low of 151.95 reached on Oct. 21. That level was widely believed to have prompted authorities to step into markets again. 

“I do think there’s been a certain amount of impact from intervention,” Suzuki told reporters Tuesday after being asked about the yen remaining stronger than 150 to the dollar since last month’s sharp moves. 

The upcoming Federal Reserve meeting provides the next clear test of the currency’s direction and Japanese policymakers’ strategy for keeping a brake on excessive volatility.

The monthly intervention figure surprised some observers who had expected a larger spend based on sharp moves in markets and the relative stability of the currency in recent days. A strategy of remaining silent about taking action since Japan first intervened on Sept. 22 may be paying off by keeping speculators in the dark about its operations.

“My personal impression is that they didn’t spend that much. Given the price moves with the amount they spent, the interventions were quite effective,” said Yoshio Iguchi, managing director at Traders Securities in Tokyo. “If they had spent a larger sum and the dollar-yen was at this level, markets could have resumed their challenge.”

The relative lack of volatility after the BOJ’s widely-expected stand-pat decision on Friday also suggests speculators have become more wary of using set pieces as an excuse to ramp up their bets. After a similar decision in September, the yen slid sharply, ultimately triggering the country’s first intervention to support the currency in 24 years.

On both occasions BOJ Governor Haruhiko Kuroda’s dovish comments led to yen weakness.

The Fed’s decision and policy guidance on Thursday loom as the next major catalyst. If Fed Chair Jerome Powell signals a more aggressive tightening stance than expected going ahead, the yen could come under further selling pressure. The opposite scenario is also a possibility.

Some analysts already see the Fed’s tightening cycle approaching its peak. Economist Atsushi Takeda at Itochu Research Institute said after the intervention data was released that signs of the Fed slowing its rate hikes would ease further selling pressure on the yen, allowing authorities to spend even less on direct market action.

--With assistance from and .

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