Japan’s foreign exchange reserves fall after record on market shakeout, currency intervention

Japan’s foreign reserves have fallen for two consecutive months Japan’s $1,238 trillion reserves are second largest after China’s reserves fall comes after last month’s currency intervention Parent authorities on speculation on US Treasury bond salesNever a cap posed to “ammunition” for FX intervention – Kanda

TOKYO, Oct. 7 (Reuters) – Japan’s foreign reserves fell by a record $54 billion in September, official data showed on Friday, as global market tricks dent the value of foreign bonds and prompted intervention in the sale of dollars to stop a sharp decline in the yen.

Reserves stood at $1,238 trillion at the end of September, the lowest amount since the end of March 2017, according to data from the Ministry of Finance (MOF).

Data on Japan’s foreign reserves, the world’s second largest after China, came a week after separate MOF figures showed Tokyo spent a record 2.8 trillion yen ($19.32 billion) last month. .

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Markets speculated that Tokyo had sold US Treasuries in the run-up to the dollar’s sell-off intervention, following the yen’s steep drop to its 24-year low versus the greenback. Friday’s MOF data appeared to support that assumption, as it showed a record decline in the value of securities, including US Treasury bonds, held in reserves.

However, Treasury Secretary Shunichi Suzuki declined to confirm whether US bonds were being sold as part of his dollar-selling intervention.

Factors behind the declines included a decline in the market value of securities due to large increases in bond yields, a decline in the dollar value of euro-denominated assets due to the depreciation of the euro against the dollar and the sale of foreign currency. currency as intervention,” Suzuki told reporters.

“I cannot comment on intervention-related transactions. We will manage reserves by paying attention to security and liquidity.”

Japan’s top foreign exchange diplomat Masato Kanda said on Friday he never felt there was a limit to “ammunition” available for currency interventions.

“I have never felt any limitations. To achieve that goal, we are making several efforts,” Kanda, deputy finance minister for international affairs, told reporters.


For much of this year, particularly over the past few months, the US dollar has hit an all-time high against many of its rival currencies as a result of the Federal Reserve’s aggressive policy tightening, shocking caused the financial markets. Rising global inflation, which is driving the Fed’s action, has eroded the value of bonds worldwide.

Data released this week showed foreign reserves in other Asian economies fell, with South Korea posting its second-largest monthly drop on record as authorities intervened to ease the slump in the won to a low of 13-1/ 2 years to go. China and Indonesia also saw their reserves decline in September.

Japan’s foreign reserves include cash deposits parked with overseas central banks and the Bank for International Settlements (BIS), securities including US Treasury bills, gold, IMF reserve holdings and special drawing rights (SDRs).

The MOF does not disclose the composition of currencies in its reserves, most of which are believed to be in the US dollar as a result of the past practice of buying dollars and selling yens to prevent a strong yen from hurting exporters.

Buying yen and selling dollars is rare in Japan, which has long relied on auto and electronics exports as a major driver of economic growth.

Now policymakers are more concerned about the impact of a sharp and one-sided weakening of the yen on a nascent economic recovery from the COVID-19 pandemic, as it drives up the cost of living and makes it more difficult for business planning.

The previous record amount for a one-day intervention was 2.6 trillion yen, issued in April 1998 during the Asian financial crisis of 1997/98.

Investors are closely monitoring the daily intervention data for the July-September period, which is expected in November, to see if authorities have carried out “covert intervention” or intervened without official announcement.

Japan had not engaged in dollar-selling and yen-buying interventions since 1998, until authorities entered the market on Sept. 22, when the currency fell sharply to a 24-year low, close to 146 yen for the dollar.

($1 = 144.9500 yen)

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Reporting by Tetsushi Kajimoto; Editing by Shri Navaratnam and Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

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