What would Japanese intervention to boost a weak yen look like?

A worker holds samples of new Japanese yen banknotes at a factory of the National Printing Bureau producing Bank of Japan notes at a media event about the new notes scheduled to be introduced in 2024, in Tokyo, Japan, November 21, 2022. REUTERS/Kim Kyung-Hoon/File Photo

When Japanese authorities escalate their verbal warnings to say they"stand ready to act decisively" against speculative moves, that is a sign intervention may be imminent. After the meeting, Japan's top currency diplomat Masato Kanda said recent yen moves were too rapid and out of line with fundamentals, suggesting Tokyo saw enough reason to intervene to arrest further declines in the currency.Authorities say they look at the speed of yen falls, rather than levels, and whether the moves are driven by speculators, to determine whether to step into the currency market.

The decision would not be easy. Intervention is costly and could easily fail, given that even a large burst of yen buying would pale next to the US$7.5 trillion that changes hands daily in the foreign exchange market.When Japan intervenes to stem yen rises, the Ministry of Finance issues short-term bills, raising yen it then sells to weaken the Japanese currency.

Japanese authorities also consider it important to seek the support of Group of Seven partners, notably the United States if the intervention involves the dollar.

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