Japan's Record Currency Intervention Bankrolled by Treasury Sales

New figures from Japan's Finance Ministry reveal that Tokyo's foreign securities holdings shrunk by nearly $88 billion in August, mirroring the scale of its record currency intervention. The intervention, a joint effort with Washington, saw the two countries buy yen to a tune of $98.6 billion over four weeks through August 26.

The yen initially strengthened to around 157 after the intervention but gave back roughly half those gains by mid-August, drifting to about 159. Tokyo's selling of US Treasuries is thought to have contributed significantly to the reserve decline, with estimates suggesting that Japan holds more US Treasuries than any other foreign country.

Treasury Secretary Scott Bessent has stated that Washington 'will not hesitate to participate in further joint intervention,' and Finance Minister Satsuki Katayama has floated the Federal Reserve's FIMA repo facility as a potential future option. The Bank of Japan policy meeting on September 17-18, where markets expect a rate hike, adds another variable to the currency's trajectory.