Data from the Bank of Japan's accounts shows no intervention in the foreign exchange market. The sharp fluctuations in the yen on Wednesday are actually due to rising expectations of an interest rate hike.

Data from the Bank of Japan indicates that there was no significant intervention in the foreign exchange market by Tokyo on Wednesday, suggesting that the sharp fluctuations in the exchange rate may be due to traders' tense sentiments resulting from a recalibration of interest rate hike expectations. The forecast for the current account released by the Bank of Japan on Thursday showed a gap too small to indicate another large-scale intervention to buy yen, as seen a month ago, compared to estimates from currency brokers. The Bank of Japan predicts that its current account will decrease by 4.1 trillion yen due to fiscal factors, while the average forecast from Central Tanshi, Ueda Yagi Tanshi, and Tokyo Tanshi Research estimates a reduction of about 7 trillion yen. This difference is far below 7.29 trillion yen, which is the smallest scale of intervention by Japan since 2022. The fluctuations in the exchange rate are partly attributed to traders adjusting their positions based on expectations of the Bank of Japan's interest rate trends. A series of remarks from policymakers in Japan and the United States have strengthened the markets expectation that the Bank of Japan will raise interest rates in September, while also sparking speculation regarding a faster pace of hikes or even substantial rate increases thereafter. According to informed sources, the Bank of Japan is inclined to raise rates by 25 basis points at its September meeting. This news emerged on Thursday but also dampened ideas of a more significant rate hike. On Wednesday, the dollar/yen exchange rate briefly fell by more than 1 yen, initially prompting market speculation that Japan might intervene again following its record intervention a month ago. In the past, sharp fluctuations in the yen exchange rate exceeding 2 yen have typically been related to market concerns over the risk of Japanese intervention rather than actual intervention actions. Each time Japan's monetary authorities intervene in the foreign exchange market, they typically attempt to reverse a 5% fluctuation in the yen during the initial round of intervention, followed by smaller operations. About a month ago, Japan spent 15.4 trillion yen (approximately 98.5 billion dollars) to intervene in the foreign exchange market, while the United States also intervened for the first time in 28 years to support the yen.