Japan’s Yen Defense Delivers Big Profits Even as FX Reserves Fall to Record Lows
Japan’s Ministry of Finance disclosed that foreign currency reserves fell by a record $95 billion in August as it sold US Treasuries to support the yen, part of four months of interventions that slashed reserves by about $174 billion. Profits from these interventions flow into the Foreign Exchange Fund Special Account (FEFSA); about 30% is kept as a buffer while 70% is moved to the General Account, financing a government slush fund and policy measures such as a food tax cut. The piece emphasizes that these interventions have been hugely profitable, even as the yen remains weak and reserves shrink.