Japan spent a record 15.4 trillion yen on foreign exchange intervention last month, roughly $100 billion in weeks, to slow the yen's slide against the dollar. The single month now matches Japan's entire 2024 intervention spending, and the defense keeps proving temporary.
Japan's government spent 15.4 trillion yen on foreign exchange intervention last month, the largest single-month currency defense operation in the country's history. That works out to roughly $100 billion deployed in a matter of weeks to buy yen and slow its slide against the dollar.
A pattern of escalation
The new record eclipses what was already a year of extraordinary intervention. In 2024, Japan spent approximately 15.3 trillion yen, around $99 billion, across the entire year to stabilize its currency. A single month now matches a full year of prior spending.
The previous monthly record came during late April to May 2024, when Japan deployed 9.8 trillion yen. Earlier this year, Japan conducted what was reportedly its largest single-day yen-buying operation on April 30, spending 6.28 trillion yen in a single session. Between late April and late May, the Ministry of Finance spent 11.73 trillion yen, about $73 billion, on interventions.
Reserves are draining to fund the defense
Currency intervention isn't free. Japan funds these operations by selling foreign assets, primarily US Treasuries and other foreign securities, to raise the dollars it then sells for yen. That drawdown is showing: Japan's foreign reserves dropped by approximately $77 billion in May alone, largely from liquidating foreign securities.
Notably, Japan and the US conducted their first coordinated currency intervention since 1998 during July and August this year.
Why the defense keeps failing to stick
Each round of yen-buying delivers a temporary bounce, then the underlying forces reassert themselves. The interest rate gap between US and Japanese government bonds makes holding dollars more attractive than holding yen for yield-seeking investors. Geopolitical tensions in the Middle East have also increased demand for dollars as a safe haven, adding further pressure on the yen.
Japan's Ministry of Finance has historically focused on slowing the pace of depreciation rather than fixing an exchange rate, since the country imports most of its energy and much of its food, and a weaker yen pushes up prices for everyday goods. Analysts have consistently pointed out that sustainable yen stabilization likely requires the Bank of Japan to raise interest rates more aggressively, but the BOJ has moved cautiously, wary of choking off an economy that spent decades fighting deflation.
Japan remains the largest foreign holder of US Treasury securities, so sustained selling of those holdings to fund yen interventions could, at scale, put upward pressure on US bond yields.
Source: Crypto Briefing
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