Japan makes known the amount spent on yen-supporting intervention

The confirmation of the amount of money, which was spent by the Japanese government on the foreign exchange market intervention last week, is expected to take place this Friday. The mentioned intervening was aimed at supporting the yen. The confirmation is likely to draw attention to the difficulties the country might face in case of frequent interventions in attempts to stop rapid falling of the currency.

According to an estimation made on the basis of data obtained from money market brokers, the total sum spent on intervention on September 22 was 3.6 trillion yen, which is $24.9 billion. This is likely to set a record.

The mentioned intervention of selling the dollar and purchasing the yen was targeted at stemming a decline of the Japan’s national currency. It has become the first event of such kind in 24 years.

The eventual figures of the amount spent on the intervention in the period from August 30 to September 28 will be made known at 10:00 GMT on Friday with the release performed by the Ministry of Finance (MOF).

Japan is currently possessing about $1.3 trillion of its foreign currency reserve, which is the world’s second reserve of such type after the Chinese one. $135.5 billion of this sum exist as deposits with foreign central banks, as well as the Bank for International Settlements.

The mentioned deposits in the amount of $135.5 billion might be easily utilized to fund further foreign exchange market interventions in the form of selling the dollar and buying the yen. Therefore, four additional interventions similar to the one conducted on September 22 are possible to happen in the future, if said deposits are used as financial source.

As it was stated by chief economist at Totan Research Izuru Kato, Japan would have no need to sell Treasury bills of the U.S. in case of further interventions, as it’s possible to use deposits for that purpose.

In case financial resources of said deposits run out, the country will be forced to sell its securities holdings in amount of $1.04 trillion.

Deposits and securities are now the most liquid foreign assets Japan possesses, and there’s a possibility to quickly turn those assets into cash.

Gold, reserves at the International Monetary Fund (IMF) reserve and IMF special drawing rights (SDR) are among other types of foreign assets Japan holds. Although, as it was stated by analysts, it might take a period of time to convert those assets into dollar funds.