Japan Sold 692.5 Billion Yen in March to Weaken Currency From Postwar High

Japan sold 692.5 billion yen ($8.4 billion) from Feb. 25 to March 29, the Ministry of Finance said in Tokyo today, showing the nation’s efforts to bring the currency down from a postwar high that threatened a recovery from its biggest-ever earthquake.

The yen climbed to a record 76.25 per dollar on March 17, prompting the Group of Seven nations to jointly intervene in foreign-exchange markets the next day for the first time in more than a decade. The currency had risen on prospects Japanese investors would repatriate assets to pay for rebuilding.

“The intervention’s impact has been huge,” Hitoshi Asaoka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank, said before the Finance Ministry released the data. “It’s not only stemmed the yen’s gain, but also sent a clear message that they will step into the market should the yen rapidly strengthen beyond 80 per dollar. That’s significant.”

The yen traded at 82.92 per dollar at 11:07 a.m. in London from 82.89 in New York yesterday, and compared with 82.98 on March 10, a day before the magnitude-9 temblor struck. The currency was at 117.86 per euro from 117.10, down from 114.49 on March 10.

G-7 finance chiefs said in a joint statement on March 18 they will “provide any needed cooperation” with Japan. “We will monitor exchange markets closely and will cooperate as appropriate,” the statement also said. The G-7 members hadn’t stepped in the market together since September 2000 when they sought to support the euro as it tumbled in its second year of existence.

September Intervention

Japan unilaterally sold 2.12 trillion yen in foreign- exchange markets from Aug. 28 through Sept. 28 in its first intervention since 2004 to keep the yen from reaching its previous postwar high of 79.75 per dollar reached in April 1995.

The Bank of Japan pumped 40 trillion yen into the banking system in successive one-day emergency cash operations from March 14 to March 22 to try to settle financial markets after the quake. The Japanese government said there’s no evidence insurance companies were repatriating assets from abroad due to the risk of radiation leaks from a quake-crippled nuclear plant.

Totan Research Co. had estimated that the BOJ may have spent about 690 billion yen when it intervened in the currency markets on March 18, based on the central bank’s holdings of government securities. The BOJ’s debt assets temporarily increase when Japan intervenes because the government sells bills to the bank to obtain funds for intervention, said Izuru Kato, chief market economist at Totan Research in Tokyo.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.