Yen Falls as Japanese Government Prepares to Boost Intervention Funds

Japanese yen is falling today, heading lower on the news that the government is prepared to increase its intervention in the currency market. The Ministry of Finance is hoping for an extra 30 trillion yen for use in currency intervention operations.

The new intervention funds bring a cap on the bills issued up to 195 trillion yen, and leaves 65 trillion of that available for currency intervention. The Japanese have already intervened in the Forex market multiple times in 2011, in an attempt to keep the yen weak.
Right now, Prime Minister Yoshihiko Noda is working on the fourth draft of an extra budget for fiscal year 2011. This new intervention fund would be added to the budget (if approved), and provide Japan with the ability to intervene quite quickly if the government feels the yen is becoming too strong too fast.
The news that Japan is looking for a quicker way to intervene and weaken its own currency has the yen moving lower against high beta currencies like the euro and the pound. With concerns about Japan’s ability to continue weakening the currency — and evidence from the past that the country’s leaders are more than willing — it is no surprise that yen is lower today.
At 14:19 GMT USD/JPY is a little lower at 77.8215, down from the open at 78.0450. EUR/JPY is higher at 102.0660, up from the open at 101.4395. GBP/JPY is also higher at 122.0645, up from the open at 120.9750.

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