According to reserve data issued by the Finance Ministry on Friday, foreign securities holdings decreased by $75.6 billion since April, Bloomberg reported. By the end of May, total foreign reserves had dropped to $1.09 trillion. Another possible source of funding for intervention, foreign currency deposits, remained relatively stable at $162 billion.
Following confirmation that Japan’s foreign exchange market intervention reached a record ¥11.73 trillion ($73.4 billion) in the month ending May 28, the numbers were released.
Authorities purchased yen on April 30 after the currency depreciated to 160.72 per dollar, according to a person familiar with the situation. Market participants believe additional operations took place in the days that followed.
The price of 10-year Treasuries started to decline at the end of April, indicating that a minor amount of the decline in foreign securities will probably be connected to a decline in the Treasury holdings’ valuation.
Also Read: SpaceX’s AI revenue can grow 100x by 2030, Wall Street analysts project to justify valuation
Market participants estimate that almost 70% of Japan’s foreign reserves are invested in US Treasuries, despite the fact that Friday’s report does not include a comprehensive breakdown of securities holdings. Japan most certainly sold US securities to finance its recent yen purchases, according to the Federal Reserve’s custody holdings of Treasury bonds.
In Washington, where officials are increasingly concerned about the viability of the US government bond market, any Treasury sales associated with intervention may draw attention. US Treasury Secretary Scott Bessent highlighted his sensitivity to large-scale selling by foreign holders earlier this year when he cautioned Japanese counterparts that turbulence in Japan’s bond market could flow over into Treasuries.
(Edited by : Juviraj Anchil)
