Japan records the largest daily intervention to support the yen in its history

Official Japanese data revealed, on Monday, that the monetary authorities carried out the largest daily intervention in the country's history to support the yen, after they sold dollars worth more than $50 billion within one day, last July, in an attempt to stop the sharp decline of the Japanese currency, which fell to its lowest levels in nearly four decades, amid global market turmoil and escalating fears related to energy prices and geopolitical tensions.

Data from the Japanese Ministry of Finance showed that the authorities intervened in the exchange market within 3 days, between July 30 and August 3, using their foreign currency reserves to buy the yen, and to contain the pressures that pushed the currency to levels that worried the government, companies, and consumers.

The new figures reveal the scale of the extraordinary moves taken by Tokyo, and also raise questions about the ability of direct interventions to achieve sustainable stability in the exchange market, in light of the continuing economic factors that put pressure on the currency.

The biggest daily intervention

According to the data; The value of the intervention on July 30 amounted to about 7.98 trillion yen, equivalent to 50.36 billion dollars, exceeding the previous record of 6.28 trillion yen, recorded on April 30, according to Ministry of Finance records dating back to 1991. The next day, Japanese authorities spent an additional 5.55 trillion yen to support the currency, in conjunction with a rare American intervention that included selling the euro for the yen, in a move that reflected the importance of coordination between Washington and Tokyo faces sharp fluctuations in currency markets.

The authorities also carried out a third operation on August 3 worth 1.87 trillion yen, bringing the total interventions during the three days to about 15.4 trillion yen. These details provide a clearer picture of the record intervention previously announced by the authorities, amounting to about $97.19 billion, during the period from July 30 to August 26. The large amounts used reflect the Japanese government's willingness to act forcefully when currency fluctuations become a threat to economic stability. Especially since the weakness of the yen does not limit its impact on financial markets; Rather, it extends to the cost of imports, price levels, and the purchasing power of families.

The yen is under energy pressure and tensions

The interventions came after the yen exchange rate approached the level of 164 yen to the dollar, which is the weakest level of the Japanese currency in about 40 years, which raised fears that the effects of the currency’s decline would be transmitted to the real economy through rising prices of imported goods.

Japan faces particular sensitivity to fluctuations in energy prices, given its heavy reliance on imports of oil, natural gas, and raw materials, a large proportion of which are priced in dollars. The decline of the yen increases the cost of these imports in local currency terms, even in cases where global prices do not rise, putting additional pressure on industrial companies, energy utilities, and transportation companies.

These costs may also be gradually passed on to consumers through higher prices for electricity, fuel, food, and other goods, which makes it more difficult to maintain price stability and household spending.

In this context, Tsuyoshi Ueno, chief economist at the NLI Research Institute, said that the massive scale of interventions reflects the Japanese government's sense of urgency in the need to stop the yen's decline. He added that the circumstances related to Iran, which represent one of the main factors behind the weakness of the Japanese currency, have not yet been resolved, which means that the yen may remain subject to downward pressure in the coming period.

Regional coordination to confront fluctuations

The movements were not limited to Japan; The Central Bank of Korea coordinated its intervention to buy the won with Japanese operations, with the aim of enhancing the impact of the measures on the exchange markets, according to what South Korean officials confirmed at the time. This coordination reflects the common concern of Asian energy-importing economies about the repercussions of the strong dollar and high import costs. Especially when currency fluctuations coincide with disruptions in global energy supplies.

Coordinated interventions are of additional importance because they may reinforce the message to markets about the monetary authorities' readiness to act, but they do not necessarily guarantee a change in the direction of exchange rates if fundamentals supportive of the dollar persist.

Gains for exporters and costs for consumers

Despite the negative repercussions of the weak yen, the depreciation of the currency may give some Japanese exporting companies a competitive advantage in foreign markets, by reducing the relative prices of their products or increasing the value of revenues generated in dollars when converted into the local currency. This effect benefits especially companies that achieve a large portion of their sales outside Japan, while companies that rely on imported raw materials face increasing pressure on operating costs and profit margins. This paradox makes exchange rate management a complex challenge for the Japanese authorities, who seek to avoid an excessive devaluation of the currency, without harming the competitiveness of exports.

Direct intervention in the currency market requires the use of large amounts of foreign reserves, which forces the government to balance the need to calm fluctuations and maintain its ability to intervene in the future.

A test of the sustainability of currency stability

Observers believe that the effectiveness of interventions is not measured only by the size of the amounts used, but rather by their ability to change investors’ expectations and limit speculation that may exaggerate exchange rate movements. Purchases of the yen may succeed in causing a rapid reversal in the market's direction, but maintaining this improvement requires a decline in the economic and geopolitical pressures that pushed the currency to decline.

The latest data highlights the scale of the challenge facing Tokyo, after it was forced to implement unprecedented interventions within a short period, in an attempt to protect the economy from the increasing repercussions of the weak currency. As uncertainty continues over energy prices and the direction of the dollar, markets will continue to monitor the movements of the Ministry of Finance and the Bank of Japan, looking for indications that the authorities are ready to repeat interventions, or rely more on monetary policy tools.

In conclusion, the record numbers confirm that defending the yen has become an urgent economic priority for Tokyo, but the stability of the currency in the long term will remain linked to the development of global conditions and the ability of local policies to address the causes of its weakness, and not to the size of interventions alone.

The UniCredit Group, the second largest bank in Italy, raised its expectations for the full year, after recording profits in the third quarter that exceeded expectations, with an annual increase of 24 percent, at a time when it is preparing to take the reins of defining the strategy at the German Commerzbank.

After a low-value takeover bid that closed in July, and a deliberate use of financial derivatives, UniCredit CEO Andrea Ursel, a veteran M&A banker, succeeded in securing a stake close to 50 percent of the voting rights in Germany's second-largest bank, according to Reuters.

After the takeover bid received approval from the European Central Bank in October, UniCredit said on Monday that it expects to complete the remaining regulatory procedures by the end of November. Orcel told analysts that these measures are proceeding much faster than initially expected.

Regarding the opportunities to enhance banking integration in the Italian market, following the French bank Credit Agricole’s proposal to merge its local unit with Banco BBM, Orcel reiterated that UniCredit is currently only monitoring developments, having previously studied the acquisition of both Monte dei Paschi di Siena and BBM, before withdrawing from the two deals.

The bank's move in the local market was limited to investing billions of euros in the insurance company Generali, while it focused its efforts on Commerzbank and its Polish unit MBank, in addition to its investment in the Greek Alpha Bank.

A 90 percent annual increase in dividends generated from investment shares formed by Orcel contributed to boosting the bank’s revenues by 12 percent during the quarter.

A plan to boost Commerzbank's profits

UniCredit said in a statement that the first quarter of 2027 is the expected date for approving a new governance structure and starting the implementation of the Commerzbank Unlocked plan, which is a plan aimed at enhancing profits by repeating the strategy that made UniCredit, according to its description, the best in the sector during the five years in which Orcel led the group.

JP Morgan analysts believed that this date comes a little later than expectations, after Orcel previously indicated the possibility of starting implementation of the plan in January.

But UniCredit said that the merger of Commerzbank with its local German unit, HPB, may take place earlier than expected, allowing it to achieve “significant additional value.”

Orcel told CNBC that UniCredit seeks to establish a strong and constructive relationship with the German government, and that it is showing flexibility in this regard, but will not make advance commitments regarding Berlin’s request to maintain Commerzbank’s listing on the Frankfurt Stock Exchange.

UniCredit had indicated that the merger would not take place before 2028, explaining that it first wanted to allow the new management to implement changes within Commerzbank, of which the German government still owns a 13.3 percent stake.

To replace the bank's current CEO, Bettina Orlop, UniCredit must call a shareholder vote and appoint a supervisory board at Commerzbank. Orcel said that the group will take these steps “immediately” after obtaining all necessary approvals.

Orlop had strongly opposed UniCredit's offer, but last week she spoke positively about the possibility of a deal.

UniCredit's net profits rose during the period from July to September to 3.3 billion euros ($3.7 billion), exceeding analysts' expectations of 2.8 billion euros, according to average estimates compiled by the company.

The group now expects its profits for 2026, before taking into account exceptional items, to far exceed the level it had previously expected at about 11.5 billion euros.