Japan’s August foreign reserves post largest-ever drop after record intervention
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The reserves stood at US$1.208 trillion at the end of August, down by a record US$79.6 billion.
PHOTO: REUTERS
TOKYO – Japan’s foreign reserves posted their biggest-ever drop in August, government data showed on Sept 7, after Tokyo launched another round of record dollar-selling, yen-buying intervention to stem persistent weakness in its currency.
The reserves stood at US$1.208 trillion (S$1.53 trillion) at the end of August, down by a record US$79.6 billion, or 6.18 per cent, from US$1.287 trillion a month earlier, according to the Ministry of Finance (MOF) data.
The decline was led by a drop in foreign securities, held mostly in US Treasuries bought during dollar-buying intervention conducted around two decades ago, which account for about 70 per cent of Japan’s reserves.
Japan spent 15.4 trillion yen (S$125.03 billion) on intervention between July 30 and Aug 26, marking the largest intervention operation on record in a single month, separate MOF data showed in August.
The intervention helped lift the yen from 40-year lows near 164 per dollar to as high as 155.20 by Aug 3. The Japanese currency subsequently weakened towards 160 before recovering to around 155 to 156 in early September.
Part of the yen-buying operation was conducted jointly with the United States, the first coordinated intervention by the two countries since 2011, surprising markets that had seen little prospect of such action.
To soothe market concern about the limits of Japan’s capacity for large-scale intervention, Tokyo and Washington have said Japan could utilise a Covid-19 era Federal Reserve backstop for major central banks.
The Fed facility, introduced in 2020 to steady markets during the pandemic, allows Japan to raise dollar liquidity without outright sales of US Treasuries, potentially easing funding pressure on Tokyo for intervention. REUTERS
