Japan foreign reserves down for 3rd month after intervention

TOKYO  -Japan’s foreign reserves extended declines in October, following the previous month’s record drop, the Ministry of Finance said on Tuesday, reflecting the largest ever amount of yen-buying, dollar selling intervention.

The data comes alongside separate figures that confirmed Japan did not conduct stealth intervention in September and only entered the market to buy yen for dollars on Sept. 22, its first foray into the market since 1998.

The currency intervention and rising foreign bond yields more than offset other factors that would support reserves, such as higher valuations of other foreign assets and income gains from foreign bond holdings, officials said.

Japan’s foreign reserves fell for a third straight month to $1.19 trillion at the end of October, still the world’s second-largest after China, the ministry said.

Market players are scrutinizing Japan’s vast pool of foreign assets and intervention records for clues on how much more Japan might be willing to spend in its forays into the currency market, although authorities remain tight-lipped on intervention.

Separate data on intervention, which includes monthly and daily totals, confirmed that authorities did not conduct stealth intervention in September, having spent 2.8 trillion yen that month to support the yen.

Japan spent a record 6.35 trillion yen on intervention last month as the yen hit a 32-year low to the dollar.

The yen has remained under pressure as the Bank of Japan remains committed to keeping ultra-low interest rates, in sharp contrast to aggressive rate hikes by the Federal Reserve.

($1 = 146.8700 yen)