Japan's Foreign Currency Reserves Plummet as Yen Interventions Generate Billions

The Ministry of Finance in Japan has released data showing that its foreign currency reserves dropped by $94.6 billion in August, a record plunge of 8.7%, to $995 billion at the end of August.

This decline is attributed to the government's intervention in the foreign exchange markets to prop up the yen, which was also reflected in the chart showing securities plummeting by $87.8 billion in August.

However, it's worth noting that these interventions have been highly profitable for Japan, with the Foreign Exchange Fund Special Account (FEFSA) booking profits of ¥5.06 trillion ($31 billion at the time) for the fiscal year through March 2026.

The law governing FEFSA specifies that 30% of the cash proceeds from these interventions and yields have to be retained as a buffer, while the remaining 70% are moved into the government's General Account, creating a slush fund.