Japan’s foreign reserves experienced their steepest decline since ministry records began in 2000, falling 6.18% in August to $1.207 trillion, according to finance ministry data released Monday.
The drop from July’s $1.287 trillion marks the fourth consecutive monthly decrease and surpasses the previous record fall of 5.58% in May. While the ministry did not explicitly cite reasons for the valuation change, Japanese media reported that the decline was driven by interventions to support the yen and a drop in government bond values following rising yields.
Japanese officials have conducted multiple rounds of market operations over the past few months to halt the yen’s depreciation. In April and May, Tokyo purchased approximately 11.73 trillion yen ($75.26 billion). This was followed by a larger 15.4 trillion yen intervention at the end of July, which included coordinated action with the United States selling euros to bolster the currency.
The cumulative 27.1 trillion yen deployed so far represents the highest yearly spending on intervention ever recorded, overtaking the previous record of 20.4 trillion yen set in 2003. The July operation marked the first coordinated intervention between Japan and the U.S. to support the yen since 1998.
The currency has recovered somewhat from a 40-year low of 163.98 per dollar hit on July 23, currently trading around 155.98. Global bond yields have also climbed to multiyear highs, with significant milestones reached in German, British, and U.S. Treasuries, contributing to the valuation decline in Japan’s reserve portfolio.
Masahiko Loo, senior fixed income strategist at State Street Investment Management, told CNBC that the reserve reduction was primarily a result of dollar-selling and yen-buying foreign exchange interventions. “The decline reflects policy action rather than financial stress,” Loo said when asked about investor concerns.
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