The yen surged on expectations surrounding Japan-U.S. monetary policy, briefly strengthening to the ¥154-per-dollar level. At the same time, foreign reserves announced by the Ministry of Finance recorded one of their largest declines on record.
The yen surged in the London foreign exchange market on 7 September, briefly strengthening to the low ¥154 range per dollar. In the Tokyo market, the dollar moved into the mid-¥155 range before yen buying intensified as European traders entered the market, with the dollar trading at ¥154.45–¥154.55 at 11:00 a.m. The yen also strengthened against the euro, sending cross-yen pairs broadly lower.
The market was influenced by changing expectations for the Japan-U.S. interest-rate differential and uncertainty over the outlook. An official at a Japanese bank said that, although there had been few new market catalysts, adjustments to yen-short positions had driven dollar selling and yen buying.
The currency moves also spread to the equity market. The Nikkei Stock Average rose sharply from the previous day, but more than half of the listed stocks edged lower, reflecting continued volatility.
The Ministry of Finance said that foreign reserves stood at approximately ¥188 trillion at the end of August, down 6.2% from the end of the previous month and marking the largest decline on record. The decline was attributable to large-scale yen-buying and dollar-selling intervention from late July onward, including the sale and conversion of approximately ¥14 trillion worth of U.S. Treasury securities held by Japan.
The Ministry of Finance said the intervention, conducted over the one-month period from 30 July to 26 August, was among the largest monthly dollar-selling, yen-buying operations on record.