Japan likely drew on its holdings of foreign securities, including US Treasuries, to finance its record currency market intervention over the past month. Tokyo's holdings of foreign securities at the end of May dropped by $75.6 billion from April, matching the scale of intervention that hit a record ¥11.73 trillion in the month through May 27. A Finance Ministry official acknowledged intervention was among the factors behind the sharp drop in foreign reserves, which was the largest on record. Foreign currency reserves fell to $1.09 trillion at the end of May, while foreign currency deposits were largely unchanged at $162 billion. Finance Minister Satsuki Katayama said bold actions are permitted under the US-Japan joint FX statement and warned speculators that authorities could take further action.
Bank of JapanBank of Japan's intervention policy is validated and likely to continue, supporting its credibility.