Japan’s foreign reserves have fallen at their fastest pace since the finance ministry began keeping records in 2000, dropping 6.18% in August.
Finance ministry data showed that foreign reserves stood at $1.207 trillion, down sharply from July’s figure of $1.287 trillion.
The decline marks the fourth consecutive month that reserves have contracted, extending a troubling streak for the world’s third-largest economy.
The August drop also surpassed the previous record set in May, when reserves had fallen by 5.58%, underscoring the scale of recent intervention activity.
While the finance ministry did not officially state the reason for the decline, Japanese media outlet Kyodo News cited an unnamed finance ministry official attributing it to interventions aimed at propping up the yen and a decline in the value of government bonds following a jump in yields.
Global bond yields have been climbing to multiyear highs, with yields in Germany, the United Kingdom, and U.S. Treasuries all hitting sharp milestones 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 has conducted multiple rounds of currency intervention to support the yen, buying approximately 11.73 trillion yen, or $75.26 billion, in April and May alone.
A larger intervention of 15.4 trillion yen followed at the end of July, which was supplemented by the United States selling euros to support the yen, marking the first coordinated action between the two countries since 1998.
According to finance ministry data, the combined 27.1 trillion yen spent so far represents the largest yearly intervention amount ever recorded, surpassing the previous record of 20.4 trillion yen set in 2003.
The yen had hit a 40-year low of 163.98 against the dollar on July 23 before the intervention efforts pushed the currency back to 155.98.
When asked whether the sharp drop in reserves should concern investors, State Street’s Loo offered a measured response, saying “the decline reflects policy action rather than financial stress.”
