Has the Japanese government intervened in the yen? Analyst: Keep a close eye on the Federal Reserve's balance sheet

On Monday, April 29th, after the Japanese yen fell below the key level of 160 against the US dollar, it staged a strong rebound and then rapidly rose, reaching the level of 155.06. The yen's intraday volatility exceeded 500 points, almost equivalent to the intervention by the Japanese government in 2022. The Bloomberg Dollar Spot Index extended its decline to 0.5% intraday.

Reports indicate that the Japanese Ministry of Finance intervened in the market to support the yen on Monday. However, Japanese officials have not acknowledged any intervention in the foreign exchange market. Kanda Masato, Vice Minister of Finance in Japan, responded that they will disclose whether they intervened in the foreign exchange market by the end of May.

Market widely believes that the Japanese government has taken action

Bipan Rai, a foreign exchange strategist at CIBC, stated that the Federal Reserve's balance sheet data could provide clues to the Japanese government's intervention in the yen, and investors should pay close attention to this. With the yen depreciating rapidly, the Fed's repurchase of foreign exchange reserves and cash deposits increased last week. This increase has been a way for foreign central banks, especially the Bank of Japan, to accumulate US dollar liquidity for intervention.

Takafumi Onodera, Head of Sales and Trading at Mitsubishi UFJ Trust and Banking, stated that it makes sense for Japanese authorities to intervene in the market in the quiet market environment during the Japanese holidays, as the movement of the USD/JPY pair becomes more apparent. The yen's movement appears to be intervened, but to get official confirmation, the market will have to wait for the data release at the end of May.

April 29th was a national holiday in Japan, with domestic markets quiet, but overseas markets were quite turbulent. The largest regulated foreign exchange trading platform globally, the CME Group, stated that the trading volume of USD/JPY on that day reached the highest single-day level of the year. As of 10 pm Beijing time, the nominal trading volume reached approximately $98 billion, including over $68 billion in spot transactions and $30 billion in futures. In comparison, during the trading session on the previous Friday, the trading volume exceeded $55 billion, including $31 billion in spot transactions and $24.5 billion in futures.

The above trading data does not include the trading volume of yen options