The Japanese Ministry of Finance disclosed today that Japan’s foreign exchange reserves witnessed a significant decline of $14 billion in April, plummeting to $1.14 trillion. This sharp decrease primarily stems from the diminished value of foreign currency securities held by Japan, indicating a substantial shift in the nation’s reserve assets. However, it’s worth noting that this decline doesn’t necessarily indicate a direct downward adjustment, as the government utilizes its reserve funds for market interventions when deemed necessary.
Insights from the Japanese Ministry of Finance further elucidate that the total holdings of foreign currency securities dropped to $978 billion in April, down from $995 billion in March. This decrease is believed to be a consequence of the diminishing market value of assets abroad, particularly bonds, which have been adversely affected by the surge in bond yields.
The revelation comes on the heels of reports indicating that the Japanese government intervened in the market twice to bolster the yen. While the first intervention occurred toward the end of April, it’s anticipated that its impact may not be fully reflected in reserve data until early May.
Amidst these developments, Japanese officials have refrained from confirming any market intervention activities. However, an analysis conducted by Bloomberg news agency, based on the Bank of Japan’s current account balance numbers, suggests that Japan may have indeed intervened in the market twice last week. The estimated purchase amounts to approximately 6.2 trillion yen ($40 billion), constituting the initial phase of the operation.
Tsuyoshi Ueno, chief economist at NLI Research Institute, remarked, “If market intervention took place on April 29, the settlement date should be May 1, potentially implying that the April foreign exchange reserve figure might not fully reflect market intervention.”
The historical approach of Japanese officials to withhold disclosure regarding government interventions in the market has led investors to speculate about market movements, underscoring the inherent uncertainties surrounding such actions.