Losses from Japan’s Currency Market Intervention Mounts: Estimated at $512 billion

I earlier posted that Bank of Japan’s losses have accrued to $281 billion, it seems that the losses have been accruing pretty fast.

From the Bloomberg,

Japan’s government faces almost 40 trillion yen ($512 billion) in losses from intervening in the foreign-exchange markets to stem the yen’s advance, according to estimates by JPMorgan Chase & Co.

Valuation losses on Japan’s foreign-exchange reserves minus yen liabilities totaled 35.3 trillion yen at the end of 2010, according to Finance Ministry data. The losses may swell further as the yen is projected to climb to 72 versus the dollar by September 2012, said Tohru Sasaki, head of Japan rates and foreign-exchange research at JPMorgan Chase in Tokyo.

“It’s difficult to change the trend of the currency market” with intervention, said Sasaki, who used to work in the foreign-exchange division of the Bank of Japan, at a forum in Tokyo yesterday. “Even if the action can stem the currency’s gains temporarily, the yen will eventually appreciate.”

Japan on Oct. 31 intervened in foreign-exchange markets to weaken the yen for the third time this year after the currency gained to a postwar record. Finance Minister Jun Azumi said he will continue to intervene until he’s “satisfied.”

Japan may have spent a record amount 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 climbed 7.7 trillion yen to a total 37.2 trillion yen, according to a statement released yesterday. The figure suggests that the government sold approximately 8 trillion yen, said Yuichi Takahashi, a market economist at Totan Research Co. in Tokyo.

Perhaps for Japan’s political authorities, central banks losses can merely be covered or financed by more money printing. Yet unknown to most, such actions only intensifies the transferring of scarce sources from the public to the political institutions and to their stewards, as I pointed out here.

Maybe Japan could just be too wealthy for political authorities to desire a larger piece of the pie or that maybe the average Japanese has been more condescending and tolerable to the actions of their political leaders. Or maybe the average Japanese are not aware of this.

May be too global political and monetary authorities, including those of Japan, have venerated and are tacit disciples of Gideon Gono and his doctrine.

Mr. Gono is the incumbent governor of the Reserve bank of Zimbabwe, who successfully steered the nation’s currency, the Zimbabwe dollar, to its sensational hyperinflationary demise.

Or that there could be many more maybes left unsaid.