Japan's foreign reserves recorded the largest decline in the country's history in August, after authorities intervened in the currency market on a record scale to support the yen against the US dollar. Figures released by Japan's Ministry of Finance show that foreign reserves fell by $79.6 billion, or 6.18%, to $1.208 trillion in August, down from $1.287 trillion in July.

The massive drop came after Japanese authorities sold US dollars and bought yen as the currency depreciated to historic lows not seen in nearly four decades. The yen's persistent weakness has been driven in part by the wide interest-rate gap between Japan and the United States, as the Bank of Japan has kept policy rates far below those of the Federal Reserve, encouraging capital flows toward dollar assets.

BREAKING: 🇯🇵 Japan's foreign exchange reserves fell by a record $79.6B in August, reaching their lowest level since October 2022. Reserves declined -6.2% to $1.208 TRILLION. The historic drop came after Japan spent ¥15.4 trillion ($98.7B) on its largest ever yen-buying… pic.twitter.com/x1jFPbYcue — Bull Theory (@BullTheoryio) September 7, 2026

Reserves Fall After Massive Intervention

The decline in Japan's foreign reserves was driven primarily by a drop in foreign securities, which account for roughly 70% of the country's total holdings. Japan maintains a substantial portion of its reserves in US government securities, accumulated over years of currency operations.

When Japanese authorities buy dollars to prevent the yen from appreciating against the US currency, the country's foreign asset position grows. Conversely, selling dollars and buying yen reduces those reserves. Japan has repeatedly used this tool in recent years, carrying out yen-buying interventions in 2022 and again in 2024 when the currency came under similar pressure, though never before on the scale seen in August.

According to Japan's Ministry of Finance, the country spent approximately ¥15.4 trillion, or $98.66 billion, on currency intervention between July 30 and August 26 — the largest amount Japan has ever deployed in a single month. The operation was aimed at slowing the yen's fall and easing pressure from its rapid depreciation.

Yen Recovers After Tokyo Steps In

Before the intervention, the yen had weakened to nearly ¥164 against the US dollar, its lowest level in about 40 years. Following the intervention, the currency strengthened to around ¥155.20 per dollar on August 3.

The rebound later lost some momentum, with the yen slipping back toward ¥160 before recovering to approximately ¥155–156 in early September.

These price movements illustrate the dilemma Japan faces: intervention can provide temporary relief, but sustaining a stronger yen requires very large amounts of foreign currency. A weaker yen, while a tailwind for Japanese exporters, raises the cost of imported food and energy for households and businesses, one reason policymakers have grown more sensitive to sharp yen declines.

Japan and US Coordinated Currency Action

A notable aspect of the episode was the participation of the United States. Part of the yen buying was conducted jointly by Japan and the US, marking their first coordinated currency intervention since 2011. The move came as a surprise, as prospects for such coordinated measures had been considered low.

Both Japan and the US have pointed to the Federal Reserve's dollar liquidity arrangement, which was established during the coronavirus pandemic. The facility would allow Japan to obtain dollar liquidity without immediately selling US Treasuries, expanding Tokyo's options should another intervention become necessary.

However, the latest reserve data show how quickly Japan's foreign assets can be depleted in defense of the yen. Given the yen's current situation, future releases of the Ministry of Finance report will be closely watched, both as a gauge of any further intervention and as a signal of how much ammunition Tokyo still has.