Japan’s Foreign-Exchange Reserves Suffer Record Drop After Yen Intervention

Japan’s foreign-exchange reserves recorded their largest fall on record in August after the government intervened to support the yen against the dollar with backing from the United States.

The Finance Ministry said reserves stood at $1.21 trillion at the end of August, down $79.6 billion, or 6.18%, from the previous month. It was the sharpest decline since comparable records began in 2000 and the fourth monthly drop in a row.

The decrease followed a joint intervention by the Japanese government and the Bank of Japan, conducted with Washington in late July. Tokyo bought yen and sold dollars as the Japanese currency weakened sharply. Foreign securities, including U.S. Treasury bonds, fell by $87.773 billion to $839.559 billion, while deposits declined by $6.868 billion to $155.417 billion.

The Finance Ministry confirmed at the end of August that Japan had spent ¥15.4 trillion on the unexpected joint intervention. The action helped the yen recover from a 40-year low of nearly ¥164 to the dollar. But amid heavy volatility, the currency weakened again toward ¥160 before recovering to around ¥155 in early September after U.S. Treasury Secretary Scott Bessent urged the Bank of Japan to address the yen’s weakness.

The ministry did not disclose details of the transaction. Several analysts consider it likely that Japan sold U.S. Treasury bonds to raise the dollars needed for its yen-buying operations.