Japan's Record Reserve Decline Matches Largest-Ever Currency Intervention

Japan's foreign reserves plummeted by a record $79.6 billion in August as authorities drew down overseas assets to fund their largest-ever currency intervention. The data show Japan still has substantial financial resources available if it needs to intervene again.

The decline was the largest monthly drop on record, led by a $87.8 billion drop in foreign securities, which are believed to consist largely of U.S. Treasuries. Foreign securities account for a substantial share of Japan's reserve assets, with market participants estimating that around 70% of the country's reserves are invested in U.S. government debt.

The scale of the decline closely matched the funds needed for Tokyo's latest intervention, which helped push the yen up from a 40-year low near 164 per dollar to as high as 155.2 by August 3. The currency later weakened toward 160 before recovering to around 155 to 156 in early September.