After a record drop in September, Japan’s foreign reserves fell even more in October, the Ministry of Finance said on Tuesday. This was due to the largest ever amount of intervention to buy yen and sell dollars.
The data comes with other numbers that show Japan didn’t do any sneaky interventions in September and didn’t get into the market until September 22 to buy yen for dollars. This was the first time Japan entered the market since 1998.
Officials said that the currency intervention and rising foreign bond yields made up for other things that would have helped the reserves, like higher valuations of other foreign assets and income gains from holding foreign bonds.
The ministry said that Japan’s foreign reserves dropped for the third month in a row, to $1.19 trillion at the end of October. This is still the second-largest amount in the world, after China.
Market players are looking at Japan’s large number of foreign assets and its history of intervention to see how much more it might be willing to spend on the currency market. However, the government isn’t saying much about intervention.
Separate data on intervention, like monthly and daily totals, showed that the government did not support the yen in a sneaky way in September when they spent 2.8 trillion yen to do so.
Last month, when the yen hit its lowest level against the dollar in 32 years, Japan spent a record 6.35 trillion yen on intervention.
The yen has stayed weak because the Bank of Japan is still committed to keeping interest rates very low. This is in contrast to the Federal Reserve, which has been raising rates quickly.
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