(Bloomberg) -- Japan’s suspected currency intervention on Monday is raising questions about how far authorities will need to go to meaningfully prop up the yen.

Despite thin liquidity due to a holiday in Japan, which typically exacerbates market moves, officials may have spent nearly as much as one of the interventions in 2022, when they bought a record amount of yen, according to a Bloomberg analysis of central bank accounts.

BOJ Accounts Suggest Japan Intervened Monday to Support Yen

“Despite spending ¥5 trillion in a market where there should have been little trading activity, the yen was pushed up by only a little over ¥5 and quickly recovered more than half its value,” said Takuya Kanda, the head of research at Gaitame.com Research Institute. “That doesn’t seem very cost effective” compared to intervention two years ago, he said.

The yen sharply rebounded to 154.54 after hitting a 34-year low of 160.17 on Monday, spurring speculation the government had intervened. Since then, it has given up much of those gains, nearing 158 on Wednesday.

Japan’s top currency official Masato Kanda hasn’t said whether authorities stepped into the market on Monday, though he said that he will take appropriate action to counter excessive moves driven by speculation.

When Japan intervened on two working days in a row in October 2022, the yen appreciated to 145.56 from 151.95 and then steadily strengthened, helped by speculation the Federal Reserve would halt rate hikes. 

This time around, strong US data and sticky inflation are raising expectations the Fed will keep interest rates higher for longer, adding to the risk the yen will weaken further.

While a weak currency generally helps Japanese exporters, businesses have called on the government to take action to bolster the yen, saying excessive depreciation will hurt earnings from rising costs of imported materials. A weaker yen has also raised concern that gains in real wages may evaporate if gone too far.

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