Tokyo Shifts from Intervention to Rate Hikes as Yen Reserves Plummet $79.6 Billion

Japan's foreign exchange reserves plummeted by $79.6 billion in August, marking the steepest monthly drop on record.

The decline was largely driven by a reduction of $87.8 billion in holdings of overseas securities, which closely tracks Tokyo's recent currency operations.

Finance Minister Satsuki Katayama said that Japan and the United States remain aligned on currency policy, despite traders now overwhelmingly expecting the Bank of Japan to raise interest rates at its September meeting.

The yen has strengthened against several currencies since Tokyo's strategy for defending the yen shifted from massive currency intervention toward interest rate hikes.