Japan has scaled back its massive yen-selling intervention since mid-March despite upcoming data that is expected to show the month's overall volume outweighed that in February, analysts said. Japan's spending on currency intervention from February 26 to March 29 is forecast to have totaled anywhere between 3.5 and 5.0 trillion yen ($33.2-47.4 billion). That compares with the 3.342 trillion yen spent in February to stem the currency's rise against the dollar and ease pressure on Japanese exporters hit by a strong yen. "The amount may be quite similar to or larger than last month's, which may look like Japan has not actually cooled down on intervention," said Izuru Kato, chief economist at Totan Research Co. "But there is no doubt that Japan's intervention stance has changed from the last half of the month," he said. The government is due to announce the amount on Wednesday around 1000 GMT.
Analysts said most of the yen-selling, dollar-buying currency intervention in March was believed to have been conducted in the first half of the month, when downside risks for the greenback rose on surprisingly disappointing U.S. jobs data. Japan's aggressive intervention sent the dollar to a peak of 112.32 yen on March 8 -- a level not seen since late September 2003 -- from below 109 yen. But the dollar retreated to as far as 105.20 yen on Monday -- a 6.7 percent decline from the peak.
U.S. UNEASE, JAPAN IMPROVEMENT
The dollar's slide was triggered by a growing belief that Japan may no longer feel a need to suppress the yen with such conviction once book-closings for most Japanese corporations are over at the end of Japan's financial year on Wednesday. Many market participants say U.S. authorities seem irritated by the large-scale intervention as Washington probably doesn't mind a weaker dollar at a time when its economy needs a stronger recovery and politicians are seeking support from large manufacturers ahead of the presidential election this year. Earlier in the month, U.S. Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan expressed discomfort about Japan's massive yen-selling intervention. Such speculation has flared up after a variety of media reported that Japan had altered its intervention policy, quoting monetary officials. Added to the yen's strength was a surprise upward revision by rating agency Standard and Poor's of its outlook on Japan.
Increased confidence about Japan's economy and capital inflows to Japanese stock markets were also seen to have made it difficult for Tokyo to stop the yen's advance. "Given improving domestic data and rising stock prices as well as growing criticism from both inside and outside Japan, the authorities are likely to have judged that it was not necessary to intervene as actively as before," said Tohru Sasaki, chief forex strategist at JP Morgan Chase. Japan has sold more than 30 trillion yen in intervention since the start of last year in a bid to rein in the buoyant yen. ($1=105.45 yen)///