Japan data suggests possible yen intervention of around $22 billion

A fresh market projection by the Bank of Japan on Friday hints at a possible intervention of around $22 billion into the currency markets as the country tries to prop up the ailing yen.

The Japanese currency popped 3% against the dollar late Thursday as the market responded to surprisingly soft U.S. inflation data. It was the yen's biggest daily rise since late 2022, according to Reuters, and came as traders were already on high alert for currency intervention by Japanese authorities.

On Friday, daily current account balance data from the Bank of Japan projected that a drain of 3.17 trillion yen ($20 billion) will occur on July 16. Markets are shut Monday July 15 for a public holiday.

This compares to an earlier forecast for a surplus of around 400 billion yen, according to news agencies the Nikkei and Reuters, leaving a surprise 3.57 trillion yen ($22.49 billion) gap in the finances. This is expected to have been spent on currency intervention on Thursday, with foreign exchange transactions taking two working days to settle.  

Markets analysts speculated that policymakers had used the opportunity of the U.S. inflation data to enter the market.

Masato Kanda, the vice minister of finance for international affairs of the Ministry of Finance, told Jiji Press that he was not in a position to comment on any possible intervention. A spokesperson for the ministry wasn't immediately available for comment when contacted by CNBC.

The yen has been combating sustained pressure since the Bank of Japan ended its monetary policy of negative interest rates in March.

In late May, Japan confirmed its first currency intervention since 2022 with a $62 billion spending spree. The ministry stated at the time that Japan had spent 9.7885 trillion yen on currency intervention between April 26 and May 29.

This timeline coincided with a sharp rebound in the Japanese currency versus the dollar in the weeks prior. The yen had plunged to a 34-year low of 160.03 against the U.S. dollar on April 29. It later bounced to 156 levels, sparking speculation of a potential intervention by Japanese authorities before it was confirmed.

Japanese Finance Minister Shunichi Suzuki has previously backed the need for intervention if sharp currency moves start to impact households and companies.

On Friday, the yen steadied to trade around 158.5 against the greenback, after hitting 157 on Thursday, but spike again in the late evening with more talk of another intervention. It fell to 157.71 shortly after fresh data was released stateside.

Dollar-yen (5-day)