Japan Sells US Treasuries to Fund Record Yen Support Efforts

Japan's foreign securities holdings declined by $87.8 billion in August, according to recent data. This reduction aligns with the scale of Tokyo's efforts to support the yen, which saw a record monthly expenditure of ¥15.4 trillion ($98.6 billion) during the month ending August 26.

Market participants estimate that around 70% of Japan's foreign reserves are allocated to US Treasuries. However, valuation changes contributed minimally to the decline in foreign securities, as the price of 10-year Treasuries was only marginally lower at the end of August compared to July.

The data suggests that Tokyo may have sold a portion of its US Treasury holdings to fund its currency intervention efforts. This strategy has been employed despite US officials' concerns about stability in the Treasury market, particularly ahead of the upcoming midterm elections.