According to a Bloomberg report, Tokyo’s foreign securities holdings decreased by $87.8 billion at the end of August compared to the previous month. This reduction closely aligns with the scale of Japan’s recent efforts to support the yen.
The ministry previously confirmed that authorities expended a record monthly total of ¥15.4 trillion ($98.6 billion) during the month ending August 26, with part of this operation conducted in collaboration with the US.
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The data does not offer a detailed breakdown of the securities holdings or their maturities; however, market participants estimate that approximately 70% of Japan’s foreign reserves are allocated to US Treasuries.
At the end of August, the price of 10-year Treasuries was only marginally lower than at the end of July, indicating that valuation changes contributed minimally to the decline in foreign securities.
Should another intervention be financed through the sale of US Treasuries, it would demonstrate Tokyo’s continued willingness to pursue this strategy, even as US officials have increasingly prioritised stability in the Treasury market, especially in light of the upcoming midterm elections.
Recently, Treasury Secretary Scott Bessent announced that the government would double the size of its buybacks of longer-dated debt for two months ending November 4. This action appears to be aimed at controlling longer-term yields.
While the report on Monday indicated that Japan’s foreign currency reserves decreased by $94.6 billion to $995 billion at the end of August, the remaining amount still reflects significant resources available to authorities should they need to intervene again. Additionally, foreign currency deposits, another potential source of intervention funds, fell by $6.9 billion.
In addition to these funding options, Japan may also tap the Foreign and International Monetary Authorities Repo Facility in future interventions, Finance Minister Satsuki Katayama suggested after the US-Japan joint intervention, the report also added.
The facility enables Japan to access up to $60 billion per day without selling Treasuries, limiting any impact on US yields and expanding the potential scope for intervention.
