Japan's Foreign Reserves Plummet by Record $79.6 Billion Amid Largest-Ever Intervention

Japan's foreign reserves plummeted by a record $79.6 billion in August to $1.208 trillion, following Tokyo's largest-ever yen-buying intervention. The Ministry of Finance (MOF) data revealed that the decline was primarily driven by a drop in foreign securities, mostly U.S. Treasuries, which account for about 70 percent of Japan's reserves.

The MOF spent a staggering ¥15.4 trillion ($98.66 billion) on intervention between July 30 and August 26, marking the largest single-month operation on record. This move helped stabilize the yen, lifting it from 40-year lows near 164 per dollar to as high as 155.20 by August 3.

The coordinated intervention with the United States was a surprise, given that markets had seen little prospect of such action since 2011. Tokyo and Washington have also hinted at utilizing a COVID-19 era Federal Reserve backstop for major central banks, which could potentially ease funding pressure on Japan.