Japan’s foreign exchange reserves fell by a record $1.238 billion at the end of September following the government’s dollar-selling intervention during the month to halt a sharp decline in the yen, data showed on Friday. of the Ministry of Finance.
The amount compared to $1.409 trillion a year ago and was the second straight month of year-on-year declines in Japan’s foreign exchange reserves, which are the world’s second largest after China.
The decline in reserves was flagged after separate MOF data last week showed Japan spent as much as a record 2.8 trillion yen to intervene in the market last month.
Japan’s foreign exchange reserves consist of cash deposits with foreign central banks and the Bank for International Settlements (BIS), securities, including US Treasury bills, gold, a reserve position in IMF and special drawing rights (SDR).
The declines in deposits and securities mean that these two types of assets were likely used to fund the latest intervention.
The Department of Finance does not disclose the composition of currencies in reserves, much of which is said to be the US dollar due to the past practice of intervening to buy dollars and sell yen to prevent a strong yen from hurting exporters.
Interventions to buy yen and sell dollars have been rare in Japan, which has long relied on exports of cars and electronics as a key driver of economic growth.
Today, policymakers are more concerned about the impact of a sharp, one-sided weakening of the yen on a nascent economic recovery from the COVID-19 pandemic, as it drives up the cost of living while making it more difficult to activity planning.
The previous record amount for a single-day intervention was 2.6 trillion yen spent in April 1998 during the 1997/98 Asian financial crisis.
Investors are closely watching daily intervention data for the July-September period due to be released in November to see if authorities carried out a “stealth intervention” or if they intervened without an official announcement.
Japan had not intervened to sell dollars and buy yen since 1998, until authorities made a market foray on September 22, when the Japanese currency fell sharply to a low. 24 years old at nearly 146 yen to the dollar.