(Bloomberg) — Japan’s foreign currency reserves dropped by $14 billion in April, a fall that reflects a decline in the value of foreign securities holdings rather than intervention in the market.
Most Read from Bloomberg
The country’s forex reserves decreased to $1.14 trillion in April, largely on the back of drop in the holdings of foreign securities to $978 billion from $995 billion the previous month, according to a finance ministry report Thursday. The securities holdings had been expected to fall due to a decline in the market value of overseas assets including Treasuries as yields rose.
The data come with evidence already pointing to two recent interventions in the currency market by Japan to prop up the yen. The first move came at the very end of April after the currency hit 160 against the dollar for the first time since 1990. The suspected intervention was likely not settled in the reserves data until the beginning of May.
“If there was intervention on April 29, the settlement day would be May 1, so it’s possible the end of April foreign reserves don’t reflect the intervention,” said Tsuyoshi Ueno, senior economist at NLI Research Institute.
A MOF official declined to comment about individual transactions made in April.
While Japanese officials have steered clear of confirming if they conducted intervention, a Bloomberg analysis of the central bank’s current account suggests the nation probably entered the market twice last week, buying roughly ¥6.2 trillion ($40 billion) of yen in the first move and ¥3.2 trillion in the second, based on updated data and money broker estimates.
Read more: Japan Likely Spent About $23 Billion in Latest Yen Intervention
Japanese officials have been sticking to their strategy of concealing whether they have taken action, forcing investors to make educated guesses about the market moves. Finance Minister Shunichi Suzuki declined to confirm if the interventions took place when asked about the topic in parliament on Wednesday.
Japan’s currency chief Masato Kanda said earlier Thursday that it wasn’t true government officials spoke about market intervention, following a TV Tokyo report citing an unidentified official confirming that the government stepped into the market last week.
“We are not going to comment on whether the government intervened,” Kanda said. Japan is ready to take action at any time if it is needed, he added.
The data from the BOJ’s current accounts has become more useful for estimating the size of intervention than analyzing the reserves, according to Masafumi Yamamoto, chief currency strategist at Mizuho Securities Co.
“Foreign exchange reserves have received less attention recently because they are affected by all kinds of factors, including fluctuations in non-dollar currency rates and changes in the market value of securities holdings.”
(Adds economist comment)
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.