- Japan likely intervened to prop up yen during Golden Week
- MOF has no line-in-sand but sees 160 as key psychological level
- Selling in JGB, yen may have made authorities uncomfortable
- Japan unlikely to conduct oil futures intervention
TOKYO, May 7 (Reuters) - Japan likely intervened during the Golden Week holidays and will step back into the market if the yen renews its slide below the psychologically key 160-per-dollar level, Atsushi Takeuchi, a former central bank official who took part in Tokyo's market forays a decade ago, told Reuters.
While the Ministry of Finance (MOF) has no intention of defending a certain line-in-the-sand, it likely intervened to forestall a sharp yen selloff that could gain momentum once the currency breaks below the 160 level, he said.
"The 160 line has become a psychologically important level traders are focusing on. The MOF had to meet words with action and intervene to avoid giving the impression Tokyo would tolerate yen slides," Takeuchi said in an interview.
Authorities may also have felt uncomfortable with the fact Japanese government bonds (JGB) were being sold in tandem with the yen, which could be an early sign of so-called "Japan selling," he said.
"In the past, the yen was bought as a safe-haven currency in times of crises. That's no longer the case," Takeiuchi said. "If I were a bond trader, I also wouldn't buy JGBs given Japan's loose fiscal policy," he added.
Sources told Reuters that authorities intervened on Thursday last week, with money market data suggesting they sold about $35 billion to support the yen. Since then, the market has seen three abrupt spikes in the yen during the Golden Week holidays through Wednesday, when it jumped as high as 155.00 . The yen stood around 156.30 per dollar on Thursday.
"The price action certainly looks like intervention," Takeuchi said about the yen spikes during the holidays, adding that authorities may continue to step into the market to keep sharp yen falls in check.
"Japanese authorities understand that they have no power to change the weak-yen tide around. Their goal is to stop yen falls in hope external factors would turn in their favour," he added.
The MOF, which oversees Japan's currency policy, has not confirmed whether it has intervened in the market.
Takeuchi, who took part in several yen-selling interventions from 2010 to 2012, is now president at Ricoh Institute of Sustainability and Business.
Beyond yen-buying intervention, Japan's top currency diplomat Atsushi Mimura has even floated the prospect of stepping into crude oil futures markets, arguing that speculative swings there may be feeding volatility in the yen.
Takeuchi, however, dismissed the idea as highly unlikely, saying any move by Japan to intervene in oil futures would be well beyond Tokyo's control and logistically difficult to execute.
"Given the operational risks, I don't think Japan will intervene in the oil futures market. But if you're the top currency diplomat, you need to show you have many options on the table."
Japan has historically focused on preventing sharp yen rises that hurt its export-reliant economy. But since 2022, its focus has shifted to defending the yen from excessive depreciation, which can fuel inflation and erode consumer purchasing power.
In Japan, the finance ministry holds jurisdiction on currency policy and decides when to intervene. The BOJ acts as its agent and executes actual transactions.
Reporting by Leika Kihara Editing by Shri Navaratnam
Source: Reuters