Japan’s foreign exchange reserves fall by a record $54 billion

Japan’s foreign exchange reserves fell by a record amount in September and China’s neared $3,000,000,000 as the surging dollar hit two of the world’s largest pools of central bank assets .

Japan’s foreign exchange reserves fell by a record $54 billion to $1.24 billion after authorities spent nearly $20 billion last month to intervene in foreign exchange markets to stem the fall of the yen. The decline was also driven by the decline in the value of foreign bonds in the Japan portfolio.

In unusual remarks on a prime minister’s exchange rate, Fumio Kishida told parliament on Friday that “sharp and unilateral declines in the yen are not desirable.”

Japan’s foreign exchange reserves are at their lowest level since 2017, as markets resumed testing the 145 yen level against the US dollar.

Foreign exchange reserves in emerging markets in Asia have shrunk by more than $600 billion over the past year, the biggest drop on record, Standard Chartered writes in a note.

Foreign exchange reserve coverage in months of imports deteriorated “to the lowest level since the global financial crisis for [emerging markets] Asia-ex China,” Standard Chartered said. “Against this background, central banks can choose a more judicious use of foreign exchange reserves in the future.”

In China, total foreign exchange reserves were $3.029 billion in September, according to data from the State Administration of Foreign Exchange, down from $3.055 billion a month earlier and their lowest level this year.

China’s reserves, the largest of any country in the world, have come under scrutiny following the sharp depreciation of the renminbi due to a stronger dollar and rising interest rates. interest in the United States.

The renminbi broke through the 7 Rmb per dollar level in September before hitting its lowest level since 2008 last week, posing a challenge to Chinese policymakers as they grapple with weak economic growth and a property crisis that has slowed construction activity across the country.

Safe officials said in a statement that the decline in reserves was due to falling asset prices caused by a stronger dollar.

State-owned banks bought renminbi and sold dollars at high levels, suggesting they were encouraged to do so by authorities, a Shanghai-based trader said.

“The apparent lack of direct FX intervention does not mean that the [People’s Bank of China] let the renminbi go,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

Evans-Pritchard suggested that Beijing was “pushing back in other ways instead,” pointing to reports that state banks would be encouraged to deploy their resources to support the currency.

The authorities have also recently introduced other measures to indirectly support the currency, including rules that discourage betting against it through derivative contracts by requiring banks to deposit reserves with the central bank when making such transactions.

China’s foreign exchange reserves increased dramatically, from just over $1 billion in 2007 to $4 billion in 2014, but remained stable at around $3 billion from 2017.

Additional reporting by Cheng Leng in Hong Kong and Wang Xueqiao in Shanghai