During Golden Week, it is suspected that Japan intervened to protect the yen with $30.6 billion, causing a temporary halt to the defensive action, but the battlefront is not yet over.

According to a report by Wall Street analysts on the analysis of the Bank of Japan's account, the Japanese financial authorities did not intervene in the foreign exchange market on Thursday, the first working day of the week, as traders had expected, after suspected multiple interventions during the long Golden Week holiday. However, this currency defense battle is far from over for the Ministry of Finance and the Bank of Japan. In addition, according to the latest revised results, the Japanese Ministry of Finance spent approximately $30.6 billion to support the yen exchange rate during the Golden Week holiday. Analysts are trying to measure the scale of the latest Ministry of Finance yen purchases and compare them with a similar round of interventions in 2024. The latest data released by the Bank of Japan and currency brokers on Friday shows a small difference between the brokers' forecast report on how the previous day's flow of funds from the Ministry of Finance may affect the Bank of Japan's current account, indicating that there is unlikely to be any abnormal intervention factors at play. As for the data indicating the scale of foreign exchange interventions during the Golden Week holiday, the revised results released on Friday also roughly correspond to the Bank of Japan's initial forecast outlook, pointing to a possibility that the Japanese Ministry of Finance spent approximately $30.6 billion to support the yen during the holiday. After a sharp rise in the yen exchange rate on Wednesday, reaching a 10-week high of 155.04 yen to the dollar, the yen gave up these gains, keeping the market tense. Market participants continue to focus on the key level of 160 points, which is close to the levels at which Japanese Ministry of Finance officials intervened in the market in 2024. Some large currency brokers from Japan have stated that the Bank of Japan's initial forecasts are more effective than its revised or final results, as subsequent data may also reflect other financial factors, such as tax payments and pension disbursements. For the Bank of Japan's regular account on May 7th, which was the settlement day for the first round of Japanese government interventions in the foreign exchange market on April 30th, the contribution size of the Japanese Ministry of Finance's funds was downgraded by 1.5 trillion yen, an unusually large amount. Although analyses of Bank of Japan data and actual interventions in 2024 show no major differences in reliability between preliminary and revised data, the large revision this week has left some analysts wondering which data to focus on. Yuichiro Takai, a senior researcher at Totan Research, says that the intervention data from last week seems to have been significantly influenced by fluctuations in tax payments to the treasury. He added that unexpected fund flows from foreign central banks holding deposits in the Bank of Japan's accounts could also be a factor. "As the Bank of Japan is the executing authority for foreign exchange intervention and the Ministry of Finance is the leading department, the expected intervention amount should have been accurately reflected in the forecasts of financial and other factors," Takai said. "The corrections in preliminary or final data are more likely due to non-intervention-related financial and other factors." Using the revised data, Japan may have spent approximately 8.65 trillion yen on interventions during the Golden Week period, compared to around 9.79 trillion yen in 2024. However, if using what some market participants consider to be more accurate preliminary forecast data, the total amount of interventions so far this year could reach a staggering 10.08 trillion yen. This number indicates that, given that the Japanese financial authorities cannot significantly boost the yen exchange rate as they did two years ago, this round of efforts to curb the yen's weakness is more challenging. Ichiro Muramatsu, Japan's top foreign exchange official, said earlier on Thursday that the authorities are prepared to intervene again as speculative trends persist, and Japan is ready to take measures from "all angles" to address the situation and continue to monitor the market with a sense of urgency. However, he did not comment on Wednesday's exchange rate movements or whether the Ministry of Finance intervened again after April 30th. Japanese Finance Minister Takeya Ogatsu and Ichiro Murayama, who is responsible for foreign exchange affairs, have mentioned their close coordination with the U.S. Treasury Department on exchange rate issues several times. They may hope that Treasury Secretary Bessant will not call on the Bank of Japan to act faster during his visit. "If Bessant expresses understanding for the recent official interventions in the foreign exchange market by the Japanese financial authorities, it would be ideal for Japan," said Tsuyoshi Ueno, chief economist at the NLI Research Institute. The Japanese government seems to be upgrading the "yen defense battle" from a one-off intervention to a continuous, selective, and deterrent exchange rate defense management. Murayama's statement about responding to speculation from "all angles" essentially tells the market that the Ministry of Finance does not recognize fixed defensive points, but will precisely target exchange rate impacts from excessive, one-sided speculation, and thin liquidity during holidays. The sharp rise in the yen multiple times during the Golden Week, especially reaching a 10-week high of 155.04, indicates that the intervention strategy is more like "ambush-style liquidity management" - leveraging smaller funds to create larger exchange rate fluctuations in thin market depth, thereby increasing the cost of shorting the yen. While the Ministry of Finance is using interventions to suppress short positions on the yen, the real determinants of the yen trend are still interest rate differentials and policy credibility. If the dollar approaches 160 yen again, Japan is likely to intervene, but if there are no expectations of an interest rate hike by the Bank of Japan, a drop in U.S. yields, or improvement in energy bills, interventions may create temporary sharp rises and high volatility, rather than initiating a medium-term reversal of the yen. However, from a macro trading mechanism perspective, interventions can only change short-term trading paths and are difficult to single-handedly reverse the underlying weakness of the yen. Yen pressure still comes from U.S.-Japan interest rate differentials, energy import bills, expectations of loose fiscal policy, and low actual returns in Japan; if the Bank of Japan does not cooperate with a clearer path to raising interest rates, relying solely on the Ministry of Finance selling dollars to buy yen is essentially combating interest rate differentials with foreign exchange reserves. Traders from Goldman Sachs believe that Japan theoretically still has the capacity to intervene approximately 30 times at last week's scale, but Japanese Ministry of Finance officials are likely to conserve ammunition and choose the most impactful windows to act, indicating that having "sufficient firepower" does not equate to "unlimited intervention."