Japan’s foreign reserves have fallen at their fastest pace since finance ministry records began in 2000, slumping 6.18% during August alone.
Finance ministry data revealed that reserves stood at $1.207 trillion, sharply down from July’s figure of $1.287 trillion, representing a drop of roughly $80 billion.
The August decline marks the fourth consecutive month of falling reserves and surpasses the previous record set in May, when reserves had dropped 5.58%.
While the finance ministry did not officially state the reason for the decline, Japanese media outlet Kyodo News cited an unnamed ministry official linking the drop to yen-support interventions and falling government bond values.
The bond value decline came alongside a jump in yields, with global bond markets hitting multiyear highs across Germany, the UK, and US Treasuries in recent months.
Masahiko Loo, senior fixed income strategist at State Street Investment Management, told CNBC that the “decline is primarily the result of Japan’s recent dollar-selling, yen-buying FX interventions.”
Tokyo conducted multiple rounds of market intervention over recent months, buying approximately 11.73 trillion yen ($75.26 billion) across April and May to arrest the yen’s slide.
A larger intervention of 15.4 trillion yen followed at the end of July, supplemented by the United States selling euros to support the yen in a rare coordinated move between the two nations.
That joint action was the first coordinated intervention by Japan and the US to support the yen since 1998, underscoring the severity of the currency’s weakness.
According to finance ministry data, the combined 27.1 trillion yen spent on intervention so far represents the largest yearly total ever recorded, surpassing the previous record of 20.4 trillion yen set in 2003.
The interventions were triggered after the yen hit a 40-year low of 163.98 against the dollar on July 23, a level that alarmed Japanese policymakers and prompted emergency action.
The yen has since recovered somewhat and currently trades at 155.98 against the dollar, suggesting the intervention campaign has had at least a partial stabilising effect.
When asked whether the dramatic drop in reserves should concern investors, State Street’s Loo offered reassurance, saying: “The decline reflects policy action rather than financial stress.”