New figures from Japan’s Finance Ministry show its foreign securities holdings shrank by nearly $88 billion over August, a decline close in size to what Tokyo spent that month defending the yen. The intervention was the biggest on record — the equivalent of $98.6 billion in the four weeks through August 26, with Washington joining in for part of it.
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That intervention was the first joint US-Japan operation to buy yen since 1998, after the currency slid to roughly 164 per dollar in late July, its weakest level in about four decades. Treasury Secretary Scott Bessent said afterward that Washington “will not hesitate to participate in further joint intervention.”
The yen strengthened to around 157 immediately after the intervention, then gave back roughly half those gains by mid-August, drifting to about 159.
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Funding that scale of defense runs straight through Japan’s Treasury holdings. Japan holds more US Treasuries than any other foreign country, and roughly 70% of its total reserves sit in similar US government debt, according to trader estimates. That concentration means Tokyo’s selling can move bond markets far beyond its own borders. Treasury prices held mostly steady across that stretch, suggesting the reserve decline came from actual sales rather than a drop in asset values.
Related: Foreign Holdings of US Treasuries Drop $72 Billion as Top Three Buyers Retreat
Bessent doubled the pace of long-dated bond buybacks for a two-month window running through November 4, a push to hold long-term borrowing costs down, precisely what Japan’s own selling works against.
Finance Minister Satsuki Katayama has floated the Federal Reserve’s FIMA repo facility as a future option, a mechanism that lets Japan post Treasuries as collateral for dollar loans instead of selling the bonds outright. Japan still had roughly $995 billion in reserves at the end of August, well more than what any single month of intervention has required so far.
A Bank of Japan policy meeting on September 17-18, where markets widely expect a rate hike, adds another variable to what happens next with the currency.
