Japan to face of ¥40-trillion losses on government intervention in foreign exchange markets

The Japanese government would take an almost ¥40-trillion  hit with its intervention in the foreign-exchange markets to stem the yen's rise, estimates by JPMorgan Chase & Co show.

Valuation losses on Japan's foreign-exchange reserves minus yen liabilities stood at ¥ 35.3 trillion at the end of 2010, according to finance ministry data. This could possibly rise further as the yen was projected to climb to 72 versus the dollar by September 2012, Tohru Sasaki, head of Japan rates and foreign-exchange research at JPMorgan Chase in Tokyo was quoted in a Bloomberg report as saying.

He added it was difficult to change the trend of the currency market with intervention. Sasaki who used to work at the foreign-exchange division of the Bank of Japan was speaking at a forum yesterday, Bloomberg reported.

He added that even it the action could stem the currency's gains temporarily, the yen would eventually appreciate.

The Japanese government intervened on 31 October in foreign-exchange markets to weaken the yen, was the third instance of the government's intervention this year after the currency gained to a post WWII record.

 According to finance minister Jun Azumi he would continue to intervene until he was ''satisfied.''

It would have taken record amounts for Japan to stem the yen's gains, according to the BOJ's projection of deposits held by financial institutions at the central bank. It estimated that deposits were up ¥ 7.7 trillion to a total ¥ 37.2 yen, a statement released yesterday said.