Estimating the Scale of Japanese Foreign Exchange Intervention

Japanese FX intervention has been in the headlines lately, as the yen's depreciation has prompted Japanese authorities to step into the market multiple times over the past two years. According to media reports, the Ministry of Finance and the Bank of Japan likely intervened this past Thursday, 11 July, which saw the yen surge from nearly 162 JPY/USD to almost 157 JPY/USD. Official confirmation of the intervention won't arrive until 31 July, but we can estimate the scale of the intervention using BOJ accounts and money market broker forecasts.px.gif

Pinpoint the relevant dates

Spot FX interventions settle two business days after the transaction date. If the authorities intervened late on Thursday, 11 July, the corresponding settlement date would be Tuesday, 16 July, since Monday, 15 July, was a public holiday in Japan.

Check money broker forecasts

Next, check money broker forecasts for interbank liquidity due to fiscal factors (財政) on the settlement date. University of Tokyo Professor Hattori Takahiro provides a summary of projections from the three major money broker firms:

Note that these figures are typically expressed in hundreds of millions (億円). Averaging across all three forecasts, we get a surplus of 367 billion JPY.

Check BOJ figures

Now check the BOJ's projections for changes in interbank liquidity due to fiscal factors (財政等要因) on the settlement date. The BOJ publishes this data in three stages: a forecast one business day in advance, a tentative figure on the day itself, and a revised figure the following business day. The current forecast for 16 July shows a 3,170 billion JPY deficit, as reported here.

Calculate the difference

To estimate the amount involved in the intervention, calculate:

BOJ figure – Money broker forecasts = Estimated scale of intervention

Using the available data, we get:

-3,170 – 367 = -3,537 billion JPY

This suggests the MOF and BOJ likely spent about 3.5 trillion JPY to support the yen—roughly 22 billion USD. This estimate aligns with reports by Bloomberg, Nikkei, and Professor Hattori.

Update (10 August 2024): The latest BOJ data, both tentative and revised, now show a deficit of -2,960 billion JPY. Based on this update, the estimated intervention falls to -3,327 billion JPY.

Update (19 April 2025): The latest official MOF data confirming the intervention shows that the government sold USD and bought JPY to the tune of 3,167.8 billion JPY, which is close to our estimate.