Japan Likely Sold US Treasuries to Fund Yen Intervention
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Japan Likely Sold US Treasuries to Fund Yen Intervention
- Japan's foreign exchange reserves saw a record decline of $79.6 billion in August 2026, reaching $1.208 trillion, following significant currency intervention.
- The intervention efforts, which included a coordinated operation with the United States on July 31, 2026, were undertaken to counter the yen's weakening to a 40-year low near 164 per dollar.
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Japan likely sold a substantial portion of its foreign securities, predominantly US Treasuries, in August 2026 to finance its record yen-buying intervention. Data from Japan’s Ministry of Finance released on September 7, 2026, indicated that Tokyo’s foreign securities holdings decreased by $87.8 billion at the end of August compared to the previous month. This decline closely aligns with the estimated scale of Japan’s recent currency market operations.
Japanese authorities spent a record ¥15.39 trillion (approximately $98.66 billion) on intervention between July 30 and August 26, marking the largest single-month intervention operation on record. These efforts were aimed at stemming the persistent weakness of the yen, which had fallen to near 164 per dollar in late July. The intervention initially helped to strengthen the yen to around 155.20 by August 3. However, the currency later weakened towards 160 before recovering slightly in early September.
A portion of the yen-buying operation was conducted jointly with the United States on July 31, 2026, marking the first coordinated intervention by the two countries since 2011. This unusual collaboration aimed to address what officials described as excessive volatility and disorderly currency movements. Japan’s foreign exchange reserves, which stood at $1.287 trillion at the end of July, fell to $1.208 trillion by the end of August, a record drop of $79.6 billion. Foreign securities, primarily US Treasuries, constitute about 70% of Japan’s reserves.