- According to Bloomberg's calculations based on the Bank of Japan's (BOJ) account data, Japan's Ministry of Finance (MOF) is suspected to have intervened in the foreign exchange market with approximately 8.65 trillion yen during the Golden Week holiday. No further signs of capital movement were observed on the first trading day of this week.
- The yen-dollar exchange rate recently rose to a ten-week high of 155.04, but the momentum then subsided, with market focus shifting back to the 160 level and expectations for the Federal Reserve's (Fed) interest rate path.
- There is a discrepancy of up to 1.5 trillion yen between the official estimated data and the revised data. Totan Research points out that if the initial estimate is used as a benchmark, the cumulative intervention scale for the year may have exceeded 10.08 trillion yen, highlighting the marginally increasing cost of unilateral intervention.
Current Account Changes and Capital Flow Analysis
The current account balance forecast published by the Bank of Japan (BOJ) is the most direct high-frequency indicator for tracking foreign exchange intervention. On Thursday, the central bank's forecast aligned closely with the capital flow estimates from currency brokers, neither showing unexpected large outflows of treasury funds. This calm data confirms that after intensive operations during the Golden Week, Japan's Ministry of Finance (MOF) has entered a phase of policy observation. From a capital structure perspective, intervention operations were mainly concentrated during the holiday period with weaker liquidity, attempting to maximize exchange rate expectations through asymmetric liquidity shocks.
Discrepancies Behind Revised Data Estimates
The current market faces significant discrepancies in data metrics when assessing the scale of intervention. According to revised data, approximately 8.65 trillion yen was used for intervention during the Golden Week, slightly lower than the 9.79 trillion yen in the same period of 2024. However, the Bank of Japan made an unusual downward revision of up to 1.5 trillion yen in the scale of treasury fund inflows on the settlement date. Institutions like Totan Research tend to believe that the initial data, unaffected by subsequent fiscal revenues and expenditures such as taxes and pension payments, more accurately reflects the actual volume of foreign exchange reserves sold by the Ministry of Finance. If this metric holds, it means that the actual intervention ammunition consumed has exceeded 10 trillion yen, indicating that the marginal utility of the policy is diminishing.
Key Levels and Option Pricing Structure
The yen-dollar rate retreated after reaching 155.04, indicating that liquidity injection alone is insufficient to completely reverse the trend-driven short positions by interest rate differentials. Data from the foreign exchange options market shows that although implied volatility temporarily stabilized after the intervention, the risk reversal indicators still lean towards guarding against a future weakening of the yen. The market currently views the 160 level as a core psychological and policy defense line. If U.S. core inflation data remains sticky, delaying the Fed's rate cut expectations further, the structural gap in nominal yields between Japan and the U.S. will persist, and the yen's exchange rate center may face a new round of valuation reassessment.
