Goldman Sachs stated that Japan intervened when the yen weakened beyond 160 against the U.S. dollar. Although the associated market volatility was relatively modest, this action signals that authorities are establishing their defensive line.
Strategists at Goldman Sachs, including Yuriko Tanaka, wrote in a report that given the current scale of Japan's foreign exchange reserves, policymakers could theoretically execute around 30 more interventions of a similar size.
However, Goldman Sachs believes it is unlikely that Japan's Ministry of Finance will deploy a major portion of its reserves for such market operations.
The firm's analysis suggests the ministry will prudently select the most effective timing for any future actions, such as during periods of rapid yen depreciation.
While the Japanese government has not officially commented on whether it intervened last week, Goldman Sachs estimates the intervention amount was approximately 5 trillion yen ($313 billion).
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