foreign exchange reserves fell to record highs, but refused to admit that they sold US bonds
Due to global market turmoil, the value of foreign bonds was weakened and Japan sold the US dollar for foreign exchange intervention. Japan's foreign exchange reserves fell by a record 9html in April, a record 54000 million US dollars.
According to data released by the Japanese Ministry of Finance on Friday, Japan's foreign exchange reserves were US$1.238 trillion as of the end of September, the lowest level since the end of March 2017.
Japan is the world's second largest foreign exchange reserve country. A week ago, another data from the Ministry of Finance showed that Japan's expenditure on intervening in the market last month reached 2.8 trillion yen (total 193.200 million US dollars).
market has been speculating that after the yen fell to a 24-year low against the dollar, the Japanese government sold U.S. Treasury bonds when interfering in the foreign exchange market. Its data from the Treasury Department on Friday seemed to support this assumption, as data showed a record decline in the value of reserve securities held by Japan, including U.S. Treasury bonds, but Japanese Finance Minister Shunichi Suzuki denied it.
In addition, foreign exchange reserves of other Asian economies have declined. South Korea's foreign exchange reserves ushered in the second largest monthly decline on record as authorities intervened to deal with the Korean won's drop to a 13-and-a-half low, and the foreign exchange reserves of Indonesian also fell in September.
At present, investors are closely following the daily intervention data of Japan from July to September scheduled to be released in November to see if the Japanese authorities have conducted "secret intervention".
Non-agricultural day is particularly dangerous, the yen fell again to the critical value of intervention
yen weakened again to the level that triggered direct market intervention last month. In early trading in Tokyo on Friday, the US dollar/JPY exchange rate reached 145.14, with the yen falling for the eighth consecutive week. The US dollar/yen hit 145.90 on September 22, triggering Japanese intervention, causing the yen to rise by nearly 4% intraday. But the effect of the intervention has almost disappeared, and the long-term weakness of the yen below 145 may trigger speculation that Japan will tolerate the yen's gradual depreciation, especially as Japan's foreign exchange reserves are falling. RBCEurope's chief foreign exchange strategist in London wrote in a research report:
" Although Japan currently seems to hope to avoid the yen continuing to fall below 145, the importance of this level will soon weaken."
yen traders are preparing for further fluctuations on Friday, and highly anticipated 9html April U.S. non-farm employment data will become a key catalyst for the direction of financial markets. Moreover, will be a holiday in the United States and Japan next Monday, which may affect liquidity and further increase the possibility of large fluctuations. Mitsubishi UFM Morgan Stanley Securities Chief Foreign Exchange Strategy Daisaku Ueno said:
" If the U.S. employment data consolidates speculation about the Federal Reserve hike rate 754 basis points, the yen may test the 145 range. No matter how much foreign reserves Japan spends, intervention cannot completely stop the yen from weakening, and can only cause the yen to rebound temporarily."
data from the Japanese Ministry of Finance shows that as of the end of September, Japan's foreign exchange reserves fell from US$1.29 trillion a month ago to US$1.24 trillion, and foreign securities held by US$55 billion. " Japan 9html foreign exchange reserves fell in April, the largest on record," said Finance Minister Shunichi Suzuki. "The reasons for the decline include the decline in securities values as yields rise, and Japan's selling foreign exchange for intervention." The Japanese Ministry of Finance said last week it spent 2.84 trillion yen ($19.6 billion) in September to limit the decline in the yen.
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