Japan intervenes to counter currency weakness, sources say; yen surges

NEW YORK/LONDON/TOKYO — Japan intervened to prop up the yen on Thursday, its first bout of official intervention in nearly two years, two sources familiar with the matter told Reuters, sending the currency up by as much as 3% against the dollar.

The sources, one government and another market source, spoke on condition of anonymity as they were not authorized to speak to the media.

The dollar initially fell to 155.5 yen after the move, its lowest since March 2, in what would have been its largest single-day drop since late December 2024 if it had stayed at that level. It regained some ground and was last down 2.38% at 156.57 yen.

Before Thursday's action, investors had amassed the largest short yen position in nearly two years, selling the currency against the euro, Swiss franc, British pound and Australian dollar on the view that neither rate hikes nor the threat of intervention would come to its aid.

The bet was also the biggest since Japan last stepped into currency markets in 2024, setting up a fresh test of policymakers' resolve to curb yen speculation.

Japanese Finance Minister Satsuki Katayama said earlier on Thursday that the time to take "decisive action" in the market was nearing, in her strongest signal yet of potential currency intervention to prop up the sagging yen.

"I think that the market thought that it was just verbal intervention. It caught the market on the wrong side," Marc Chandler, chief market strategist at Bannockburn Capital Markets in New York, said.

"Intervention without a policy adjustment is not thought to be very effective. It will reinforce the sense that JPY 160 is a pain point for Japanese officials," he added.

The Nikkei earlier, citing a government source, said officials had intervened by buying the currency, which was around its weakest since July 2024 earlier on Thursday.

Top currency diplomat Atsushi Mimura also said earlier the timing to take decisive action was approaching, adding that "extremely speculative" moves in the currency market were increasing.

The Ministry of Finance has threatened intervention in currency and oil markets and on Thursday, reiterated that action could be "on all fronts."

"This is our final evacuation warning to markets," Mimura told reporters. When asked whether he was alluding to the chance of an imminent yen intervention, Mimura said: "I think market players would know what I mean."

The Japanese finance ministry's foreign exchange division could not be reached for immediate comment. — Reuters