Japan's record reserve plunge after yen intervention raises Treasury questions

Japan’s foreign-exchange reserves fell by $79.6 billion, or 6.18%, to about $1.21 trillion in August, marking the largest monthly decline in both dollar and percentage terms since comparable records began. The drop followed Tokyo’s record ¥15.4 trillion intervention campaign to buy yen and sell dollars amid the currency’s weakness. Foreign securities holdings declined by roughly $87.8 billion, while relatively stable U.S. Treasury prices suggested that actual asset sales, rather than valuation changes alone, accounted for much of the reduction. Market participants estimate that U.S. Treasuries make up a large share of Japan’s foreign securities, raising concerns about potential pressure on the U.S. government bond market, though Japan’s reserve data does not identify the securities sold.