Yellen Respects Japan’s Intervention Non-Disclosure, Kanda Says

Yoshiaki Nohara, Bloomberg News

Janet Yellen, US Treasury secretary, speaks at a news conference during the annual meetings of the International Monetary Fund (IMF) and World Bank Group in Washington, DC, US, on Friday, Oct. 14, 2022. Yellen this week, reacting to data showing another faster-than-anticipated increase in consumer prices, said the US has "more work to do" to restrain the worst burst of inflation since the 1980s. , Bloomberg

(Bloomberg) -- US Treasury Secretary Janet Yellen respects Tokyo’s decision not to disclose whether it has intervened in foreign exchange markets, according to Japan’s top currency official.

“We’re grateful that Secretary Yellen respects our direction,” chief currency official Masato Kanda told reporters in Tokyo Wednesday. “We’re in close daily communication with Group of Seven, Group of Twenty nations, and particularly with allies including the US.”

Kanda’s comments come as market moves suggest Japan has continued to step into the market since last month’s first intervention to prop up the yen in 24 years. While Japan confirmed it intervened on Sept. 22, since then it has declined to comment on whether it has entered markets.

Shortly after Kanda spoke, Finance Minister Shunichi Suzuki declined to comment when asked about Yellen’s position and whether the US side agrees with Japan’s stance of not announcing its interventions.

The US view on Japan’s foreign exchange strategy is closely scrutinized for any signs of strain or disagreement that could limit Tokyo’s ability to respond to speculative moves and sharp falls in the currency.

Given Japan’s commitment to G7 agreements on letting markets set currency rates, Tokyo generally needs sharp slides it can describe as one-sided and speculative to justify taking action against “excessive volatility.”

Japan may also need to sell some of its holdings of US Treasuries to fund further interventions, providing another potential source of US concern, given that offloading them could push up yields.

Read More: Yen Intervention Playbook Shows Foreign Funds Japan’s Key Target

Kanda said last month that stealth intervention was among the options for Japan. Such entries into the market are usually smaller and harder to detect or confirm, helping create doubt in the market over how authorities will respond to moves.

Not confirming more visible actions in the market also adds to uncertainty over how Japan is operating.

The yen strengthened overnight from around 148.8 to the dollar to as strong as 147.52. It was trading around the 148 mark Wednesday morning.

“Either way, we’re watching for disorderly moves with a strong sense of urgency,” said Kanda, repeating previous comments and again declining to comment on intervention. “We’ll continue to take bold action as needed.”

Japan likely conducted its biggest ever currency intervention to prop up the yen late Friday, based on Bank of Japan data and market estimates. The size of the suspected market action was estimated to be as much as 5.5 trillion yen ($37.1 billion).

--With assistance from Erica Yokoyama.

(Adds Japanese finance minister’s response)