Japan used so-called stealth intervention in November as the government sought to stem yen gains that hammered earnings at makers of exports ranging from cars to electronics.
Japanese Ministry of Finance data released yesterday showed Japan conducted ￥1.02 trillion (US$13.3 billion) worth of unannounced intervention during the first four days of November last year, after selling a record ￥8.07 trillion on Oct. 31, when the yen climbed to a post-World War II high of ￥75.35 against the US dollar.
The currency’s strength has eroded profits at exporters such as Sharp Corp and Honda Motor Co, just as faltering global growth undermines demand.
“Japan has clearly shown its intention to stop a further appreciation of the yen, and there is a high chance” for more yen selling, said Hideki Shibata, a senior strategist for rates and foreign exchange at Tokai Tokyo Research Center Co.
“Caution against intervention has increased in markets,” he added.
The unannounced yen sales in November were the most effective strategy to weaken the currency, a Japanese official said in Tokyo yesterday on condition of anonymity.
Japanese Minister of Finance Jun Azumi said he would not rule out any options to curb the yen’s appreciation and that he would take action whenever necessary.
His comment came a week after Sharp, Japan’s largest maker of LCD panels, forecast its worst annual loss since its founding a century ago, with its president saying exporting is “nearly impossible” with the strong yen.
Panasonic Corp, Japan’s biggest appliance maker, forecast a ￥780 billion loss, the worst since the Osaka-based company was established in 1918.
Honda, the nation’s third-largest automobile maker, forecast last Tuesday that net income for the 12 months ending next month would decline to a three-year low of ￥215 billion.
The company estimates its operating income is cut by ￥15 billion for every ￥1 gain against the US dollar.
The Bank of Japan last month lowered its forecast for economic growth to 2 percent in the year starting in April, from an October estimate of 2.2 percent, citing a slowdown overseas and the stronger yen.
The US Treasury Department criticized Japan in a December report for unilaterally selling its currency in August and October, saying the Asian nation should focus on steps to “increase the dynamism of the domestic economy.”
Intervention is an option if the yen moves excessively, Naoyuki Shinohara, a deputy managing director at the International Monetary Fund, said in an interview in Tokyo on Friday.
“We do not believe that the intervention over a period of several days by Japanese authorities signals a significant shift in tactics compared to previous interventions,” Osamu Takashima, Issei Suzuki and Todd Elmer, foreign-exchange strategists at Citibank Japan Ltd in Tokyo, wrote in a note to clients yesterday.
“Investors may be inclined to sell into any renewed bout of intervention on USD-JPY on a breakdown beneath recent range lows,” they said.
The first intervention last year was a ￥692.5 billion sale on March 18, when the Bank of Japan led a coordinated effort with G7 nations to counter a jump in the yen after a record earthquake struck Japan a day earlier, stoking speculation that companies would repatriate overseas assets to pay for rebuilding.
Japanese Prime Minister Yoshihiko Noda, who was finance minister at the time, ordered the nation’s central bank to intervene again unilaterally on Aug. 4.