Japan Sells Billions in US Treasuries to Fund Record Yen Intervention

Japan's Ministry of Finance has carried out a record foreign-exchange intervention to defend the yen, raising questions about its funding. According to data released on September 6, foreign securities holdings fell by $87.8 billion at the end of August from a month earlier.

The ministry had previously said it spent $96.4 billion in the foreign exchange market in the month through August 26 to boost the yen, the largest monthly intervention on record. It's possible that Japan sold part of its US Treasuries holdings to raise funds for this intervention.

Market estimates suggest about 70% of Japan's foreign-exchange reserves are invested in US Treasuries, fueling speculation that Tokyo sold some of those holdings. Valuation losses are not seen as a major factor behind the drop, as the price of the 10-year US Treasury at the end of August was only slightly lower than at the end of July.