Japanese government spent more than $40 billion to bolster the yen in October

The Japanese government spent at least $42.8 billion (a record 6.35 trillion yen) in the month of October to bolster the country’s currency, the yen, said a report released by the country’s Ministry of Finance, on Monday. This also comes after the government spent 2.8 trillion yen ($20 billion) in September amid the currency’s decline for almost 32-year-lows.

Reports suggest that the Japanese government started buying the yen last month, a first since 1998, to counter the sharp decline of the currency against the dollar. The finance ministry report disclosed the data for the period between September 29 to October 27, however, does not indicate the number of times the government intervened.

Earlier this year, in September, Japanese Finance Minister Shunichi Suzuki had talked about the government’s move to buy the yen, a first in over two decades, while repeatedly implying that he would not tolerate any speculative moves in the yen.

However, reports suggest that despite these actions and warnings currency has continued to hover near the 150 yen level and have attributed this to the increasing gap between the Bank of Japan, the country’s central bank and their ultra-loose monetary policy and tightening by most other large central banks across the world.

This comes amid global concern about the strength of the dollar this year with the US Federal Reserve’s push to increase interest rates to combat inflation in the country attracting larger investments in dollar-denominated assets while the BoJ is reportedly keeping interest rates near zero. On October 21, the yen hit a 32-year intraday low of 151.93 yen to the dollar, saidreports.

Meanwhile, the country’s top currency official, Masato Kanda, suggested that the government with its almost $1.3 trillion in foreign reserves has a “limitless” amount of funds to conduct interventions, said a report by Financial Times. On the other hand, analysts have questioned the effectiveness of such unilateral actions while others have expressed caution about this move increasing market volatility.

As of Monday evening in Tokyo, the yen was nearly 148.57 per dollar. As interest rates continue to widen between the US and Japan the yen is expected to stay under downward pressure against the dollar. However, a report by Bloomberg citing economist Atsushi Takeda at Itochu Research Institute speculates that the US Federal Reserve may be approaching its peak on rate hikes which should ease some pressure on the yen.

(With inputs from agencies)

WATCH WION LIVE HERE