economy

Goldman says Japan's $1 trillion of reserves leaves 'plenty of capacity' for further yen interventions

Japan has enough cash at its disposal for a couple more rounds of yen-buying on the scale of last month's intervention, Goldman Sachs says.

Goldman says Japan's $1 trillion of reserves leaves 'plenty of capacity' for further yen interventions

TL;DR

  • Japan has enough reserves for several more yen-buying interventions on the scale of last month's action, according to Goldman Sachs.
  • Access to the Federal Reserve's FIMA repo facility allows Japan to potentially leverage its full $1 trillion in U.S. dollar reserves for intervention.
  • The effectiveness of intervention is limited, as the carry differential between Japanese and U.S. borrowing rates is the main driver of the yen's depreciation.
  • The Bank of Japan's policy meeting in September is crucial for determining the yen's future direction.
  • Cooler U.S. economic data could ease pressure on the yen and increase expectations for further intervention.

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