Japan's foreign exchange reserves fell by $7.96 billion in August to $1.208 trillion, a record 6.18% drop, after the Japanese government intervened in the exchange market with nearly $9.87 billion, selling dollars to buy yen to stem the yen's weakening to a 40-year low.
On September 7, 2569, Reuters reported that Japan's foreign exchange reserves fell to their lowest level on record in August after the Japanese government implemented a large-scale intervention in the foreign exchange market by selling dollars and buying yen to curb the depreciation of the Japanese currency.
Data from Japan's Finance Ministry shows that foreign exchange reserves at the end of August stood at $1.208 trillion, down $7.96 billion, or 6.18%, from $1.287 trillion the previous month. This marks the largest monthly decline on record.
This decline is primarily due to a decrease in the value of Japan's foreign securities holdings, the majority of which are U.S. government bonds accumulated from market intervention through dollar purchases over the past 20 years. Currently, foreign securities account for approximately 70% of Japan's total foreign exchange reserves.
Previously, Japan's Finance Ministry revealed that the government spent approximately 15.4 trillion yen, or about 9.866 billion dollars, intervening in the financial markets between July 30 and August 26, the highest monthly intervention amount on record.
These measures helped the yen strengthen from its weakest level in 40 years, around 164 yen per dollar, to a high of approximately 155.20 yen per dollar on August 3rd, before weakening again near 160 yen per dollar and recovering to trade around 155-156 yen per dollar in early September.
Some market interventions were also carried out in conjunction with the United States, marking the first coordinated currency intervention between Japan and the US since 2554, surprising markets that had previously assessed the likelihood of such joint action as limited.
Meanwhile, Japan and the United States attempted to alleviate market concerns about Japan's capacity for large-scale currency intervention, stating that Japan could utilize the Federal Reserve's dollar liquidity support mechanism, established during the COVID-19 pandemic.
This mechanism allows Japan to secure liquidity in US dollars without directly selling U.S. government bonds, which could alleviate capital pressure if the Japanese government needs to intervene further in the financial markets.
Reference: www.reuters.com
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