Overview
- Japan’s finance ministry disclosed on Friday that it spent 15.4 trillion yen between late July and late August to buy yen, the largest single-month foreign-exchange intervention on record.
- Tokyo and Washington conducted a coordinated yen-buying operation around July 31–August 1, the first joint action between the two governments in decades.
- The finance ministry has been funding yen purchases by selling foreign assets, mainly U.S. Treasury and other overseas securities, and those sales have reduced Japan’s foreign reserves.
- The interventions have produced only short-lived rebounds in the yen because the core driver is a persistent interest-rate gap with the United States that many analysts say the Bank of Japan must narrow by raising rates.
- A weaker yen raises import costs for energy and daily goods for Japanese households while boosting exporter earnings, and markets will watch the BOJ’s policy moves and the reserve drawdown for possible effects on global bond yields.