The battle to defend the yen "burns" $73.6 billion! Japan's record intervention fails to stop the depreciation pressure, the market bets that further action may be taken.

It has been learned that, according to data disclosed by the Japanese Ministry of Finance, Japan used a record 11.73 trillion yen (approximately $736 billion) to support the yen exchange rate in the past month, marking the government's first intervention in the foreign exchange market since 2024. Prior to this, the yen-to-dollar exchange rate had dropped below the 160 mark. The Ministry of Finance released data for the period from April 28 to May 27 on Friday, during which the yen exchange rate saw several sharp increases. Although the authorities have not confirmed any intervention actions so far, sources revealed that such actions were indeed taken on April 30, and it is speculated that multiple rounds of yen purchases may have been conducted in the following days. The final expenditure of the Bank of Japan's intervention in the exchange rate exceeded expectations. According to calculations based on the flow of funds data from the central bank, the expected scale of expenditure after two rounds of action should have been 10.08 trillion yen. The higher figure indicates that the authorities faced greater resistance in supporting the yen exchange rate and may lead to speculation in the market about multiple interventions. This raises another possibility, that the authorities may have intervened secretly in the 158.50 to 159.50 yen range, said Rinto Maruyama, senior foreign exchange and interest rate strategist at SMBC Nikko Securities Inc. The market is likely to interpret this as: despite secret intervention, the depreciation of the yen could not be contained. This may further corroborate the view that unilateral interventions have limitations. Traders will have to wait until early August to obtain more precise information about the intervention actions. At that time, the Ministry of Finance will release second-quarter data, detailing the specific timing and scale of daily operations. The action on April 30 occurred two days after the Bank of Japan kept its interest rate policy unchanged, mirroring the situation in April 2024 when the central bank's decision to stand still at the end of the month led to a weakening of the yen and prompted government intervention in the market. These operations underscore the authorities' determination to prevent the yen from falling further. Pressured by the large interest rate differential between the US and Japan as well as inflation concerns sparked by conflicts in the Middle East, the yen continues to be under pressure, and there are currently few clear catalysts to reverse this situation. The next policy decision of the Bank of Japan will be made on June 16, and it is widely expected that there will be a 25 basis point rate hike, which may help narrow the US-Japan interest rate differential. However, the resurgence of global inflation has completely disrupted the market's expectations for further easing by the Federal Reserve this year, with several officials mentioning the risk of higher inflation. At last month's meeting, most Federal Reserve officials warned that if inflation remains persistently above target levels, the central bank may need to consider raising interest rates. The record-scale intervention action by Japan has raised doubts about its effectiveness, especially considering that the dollar had recovered most of its losses from the intervention in a few weeks. On Friday evening, the yen was trading near 159.29 against the dollar, not far from the level of 160.72 before the action on April 30. It did have some impact at the time. But I don't think they have successfully changed market expectations, said Bart Wakabayashi, manager of the Tokyo branch of State Street Bank & Trust. He believes that further actions may be taken in the future.