The Bank of Japan (BOJ) took decisive action on Thursday to support the Japanese yen, intervening in currency markets with purchases estimated at over 5 trillion yen, equivalent to approximately $32 to $35 billion. This intervention came as the yen faced sharp selling pressure against the U.S. dollar, reaching lows not seen since mid-2024. The move marks the BOJ’s first currency intervention in nearly two years, signaling Tokyo’s commitment to stabilize its currency amid growing external challenges.
Data released by the BOJ on Friday revealed that the central bank absorbed a significant volume of yen from money markets, indicating large-scale yen-buying activity designed to counteract the rapid depreciation. Prior to this intervention, the yen had fallen to around 160.72 per dollar during Thursday’s trading session before rebounding sharply to a two-month high of approximately 155.54 yen per dollar following the BOJ’s market actions.
The yen’s volatility has been driven in part by rising oil prices linked to geopolitical tensions in the Middle East, notably the conflict involving Iran. This external pressure has intensified selling of the yen, prompting Japanese authorities to act swiftly. Finance Minister Satsuki Katayama emphasized the urgency of “decisive action” and urged vigilance during Japan’s Golden Week holidays, highlighting concerns about speculative trading exploiting thin market liquidity.
Despite a slight retreat in the yen against some currencies on Thursday morning due to profit-taking and market correction, it ended the day with a strong 2.4% gain against the U.S. dollar—the largest single-day advance since January 2023. The BOJ’s intervention helped the yen record its first monthly gain in three months for April, up 1.35% against the dollar. This week alone, the yen is poised for its biggest weekly gain since February, rising roughly 1.25% against the U.S. dollar.
The intervention coincided with fresh inflation data from Tokyo showing slower-than-expected core consumer price growth of 1.5% in April, down from 1.7% in March and below market forecasts of 1.8%. This slowdown reduces pressure on BOJ policymakers to raise interest rates imminently. Market expectations for a rate hike at June’s meeting have eased slightly, dropping from a 75% chance to around 65%. BOJ Governor Kazuo Ueda reiterated that there is no immediate need for rate increases.
Looking ahead, Japanese officials have made clear their readiness to return to currency markets if necessary. Atsushi Mimura, Japan’s top currency diplomat, warned that speculation remains high and that interventions could continue as Tokyo seeks to protect its currency from excessive swings during a period of geopolitical and economic uncertainty.
Overall, the BOJ’s large-scale intervention reflects Tokyo’s active approach to managing exchange rate volatility and maintaining financial stability amid global pressures. The central bank’s actions underscore its willingness to deploy significant resources in defense of the yen as Japan navigates complex external risks and domestic economic conditions.
