- After a record monthly drop in $54 billion, Japan’s foreign currency reserves fell to $1.24 trillion over five years.
- The declining reserves are due to the decline in foreign bonds despite the dollar’s rise, and the $20 Billion spent to help the declining Japanese yen.
- The yen trades at about 145 dollars per dollar, the same level it was before the intervention.
Japan’s foreign currencies reserves plunged to a five year low in September. The government intervened massively to support the rapidly declining yen.
The record-breaking $54 billion drop in reserves last month brought the total to $1.24 trillion. This is the lowest level since 2017. This was due to the decline in foreign bonds as a result of the rise of the dollar and the Japanese government spending $20 Billion to curb the yen’s fall.
While the yen initially rallied immediately after the intervention, it has slipped to around ¥145 against the dollar again — back to where it was before Japan’s big currency move.
The US dollar has enjoyed a bull market this year due to interest rate hikes by the US Federal Reserve. Investors have also sought shelter in safe assets like greenbacks as a result of a steep market downturn that has seen the S&P 500 lose 24% from the start of 2022.
China’s foreign currency reserves plummeted to $3.029 Trillion in September, down from $3.055 Trillion in August. Chinese officials blamed the drop in foreign currency reserves to falling asset values due to a rising dollar.
Beijing has not intervened on currency markets in the same way as the Japanese government. However, the People’s Bank of China has tried other ways to prop up the Yuan, such as fixing stronger reference rates or passing rules to discourage currency speculation.
