Key Takeaways
- Japan foreign reserves fell $79.58 billion to $1.21 trillion in August.
- The reserves recorded their largest monthly percentage decline since 2000.
- Securities holdings dropped 9.5%, while gold reserves increased 13.3%.
Japan foreign reserves assets fell $79.58 billion, or 6.18%, in August to $1.21 trillion, marking the largest monthly percentage decline on record.
The decline was driven mainly by lower market values of government bonds as interest rates rose and a reduction linked to foreign exchange interventions. The reserves have now fallen for 4 consecutive months.
Foreign exchange interventions reduce reserve assets
Japan’s Finance Ministry said the decline partly reflected foreign exchange interventions carried out between July 30 and August 26. During this period, authorities sold dollars and bought yen to support the Japanese currency.
The ministry spent a record ¥15.4 trillion, equivalent to about $96 billion, on the interventions during the period. The foreign currency reserves used for these operations were reflected in the August figures.
The Japanese government and the Bank of Japan coordinated with the United States during an intervention on July 31, according to the ministry. The resulting reduction in foreign currency assets contributed to the monthly decline.
Japan’s total foreign exchange intervention amount has already reached a record level for a single year. The interventions have taken place as the yen has weakened against major currencies.
The latest decline also extended a 4-month downward trend in Japan’s foreign reserves. August recorded the largest monthly decline in both percentage and dollar terms since comparable data began in April 2000.
The movement in reserve assets also reflects changes in the value of securities held by Japan. Rising interest rates reduced the market value of government bonds within the reserves during August.
Securities Holdings Decline While Gold Gains
Securities holdings recorded the largest decline among Japan’s major reserve categories. Their value fell 9.5% to $839.56 billion during August.
Deposits also declined during the month. Their value fell 4.2% to $155.42 billion.
Gold moved in the opposite direction. Gold holdings increased 13.3% to $124.1 billion, providing an increase within the overall reserve portfolio.
The changes left Japan with total foreign reserve assets of $1.21 trillion at the end of August. The $79.58 billion monthly reduction represented a 6.18% decline from the previous month.
The August figures also show how both market valuations and foreign exchange operations can affect the reported value of a country’s reserves. Government bond values declined as interest rates increased, while foreign currency assets were used during interventions.
The intervention spending of ¥15.4 trillion was the largest recorded amount for the stated period. The use of reserves for dollar selling and yen buying reduced the foreign currency assets reported at the end of August.
Japan foreign reserves position recorded declines across its securities and deposit holdings, while gold holdings increased. Securities remained the largest component at $839.56 billion, followed by deposits at $155.42 billion and gold at $124.1 billion.
The latest figures mark another decline after 3 consecutive monthly reductions. August’s fall was the largest recorded since the current comparable data series began in 2000.
Japan ended August with $1.21 trillion in Japan foreign reserves, down from the previous month by $79.58 billion. The figures reflect both market value changes and the impact of foreign exchange operations conducted during the month.
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