Japan’s reserves fall a record $79.6 billion after the yen defence

Japan’s foreign reserves fell $79.575 billion in August to $1,207.524 billion. The Ministry of Finance released the table on Monday, 7 September. It is the largest drop in both dollars and percentage terms since the comparable series began in April 2000. The month-on-month decline is 6.18 percent. Reserves have now fallen for four months in a row.

The composition tells you where the money went. Foreign securities, mostly U.S. Treasuries, fell 9.5 percent to $839.559 billion. Deposits fell 4.2 percent to $155.417 billion. Gold rose 13.3 percent to $124.103 billion, a price move rather than a buying spree. The IMF reserve position and the SDR line barely moved.

A ministry official, speaking to Kyodo, gave two reasons. Japan sold dollars and bought yen between 30 July and 26 August. Separate ministry data put that operation at ¥15.4 trillion, about $99 billion, the largest intervention month on record. Rising yields also marked down the bonds Japan still holds. Both effects landed in the August print.

The yen had traded near 164 per dollar, a four-decade low, before the intervention. It reached 155.20 on 3 August, drifted back toward 160, then settled around 155 to 156 in early September. Part of the July-August operation was done with the United States. That is the first coordinated yen support by the two countries since 2011, or 1998 if you take the older benchmark some desks still use. Markets had not been pricing a joint move.

Year-to-date intervention is now 27.1 trillion yen, above the 20.4 trillion yen record set in 2003. Japan can, in theory, tap a Federal Reserve line for dollars instead of selling Treasuries outright. The August table shows securities falling hard anyway. Someone sold paper, or the paper they kept was worth less, or both.

For a country that sits on one of the world’s largest reserve piles, $1.21 trillion is still a large number. The rate of change is the story. A 6 percent hole in a single month is what a record defence of the currency looks like when you print it in dollars. It is also what higher U.S. yields do to a portfolio that is 70 percent securities.

Traders will now watch two things. One is whether Tokyo has to intervene again if the dollar-yen rate heads back through 160. Each new round takes more off the reserve line. The other is the Treasury market. If yields keep rising, the mark-to-market hit continues even if the ministry stays out of the spot market.

The political reading inside Japan is simpler. The government chose to spend real reserves to stop a slide that was feeding import prices. It did so with Washington in the room. The invoice arrived on Monday in a spreadsheet. Whether that spend holds the yen is a question for the next print, due after the end of September.

Gold’s rise on the same table is a reminder that not every line is a policy choice. The metal moved. The securities line moved because officials sold dollars and because bond prices fell. Those are the two facts a reader can take from the ministry’s own numbers without borrowing anyone else’s forecast.