No hints of Bank of Japan yen intervention in the data

Japanese FX reserves have jumped higher in December.

When the yen was dropping sharply in 2023 there was near-constant questioning on possible Bank of Japan intervention to proper up the currency. In a nutshell this would have involved selling USD/JPY. Such intervention doesn’t come free of charge. As I posted back in September of last year

As for intervention to halt the losses for yen, this is not so easy:

• Japan’s foreign exchange reserves are limited
• the 2022 interventions cost the country about US$62 billion
• which will dissuade the government from aggressive intervention (this Japan’s Ministry of Finance that instructs the BOJ to intervene) until the rate hits circa 155

Yes, for the BoJ to sell USD they’d have to dip into reserves. There is other data indicative of intervention also, but reserves are a guide. I guess you could start speculating the Bank is buying USD/JPY to halt the yen rise! (Only kidding)

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Also posted back in September of 2023:

A note on the mechanics of intervention:

• The Ministry of Finance (MOF) in Japan is responsible for formulating foreign exchange policy in the country, while the Bank of Japan (BOJ) is responsible for executing such policies, particularly in terms of FX intervention.
• The MOF can decide to intervene in the FX market if it believes (in the current situation) the yen is too weak. Once the MOF decides to intervene, it gives instructions to the BOJ. The BOJ then conducts operations in the FX market by (in current circumstances) buying yen. The Foreign Exchange Fund Special Account (FEFSA), which falls under the jurisdiction of the MOF, is used for interventions. You will note that in the current situation, where the BOJ would buy yen, they will dip into USD reserves to fund the other side of the trade, buying USD (or other currencies if needed).
• The BOJ’s operations are usually conducted through commercial banks that deal in the foreign exchange market. They may be spot transactions, or forward transactions that are set to occur at a future date. Note that while the MOF has the ultimate authority to decide when to intervene, it does so in close consultation with the BOJ. The BOJ provides expertise and advice on monetary and financial market conditions, which can influence the MOF’s decision. This collaboration reflects the balance between the roles of the two entities: the MOF as the government’s chief financial and economic advisor, and the BOJ as the country’s central bank that maintains stability in the financial system.