Japan's foreign currency reserves hit record $1.238 trillion

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Japan's foreign currency reserves hit record $1.238 trillion

The foreign currency reserves of Japan fell by a record $54 billion to $1.238 trillion at the end of September, after the first intervention in 24 years to stop the yen's rapid depreciation, Finance Ministry data showed Friday.

The U.S. Treasurys decreased to $985.27 billion from $1.036 trillion at the end of August, marking the largest decline for a month. Deposits were almost unaffected by $136.11bn.

Japan's foreign currency reserves fell to their lowest level since March 2017, after the largest month-on-month drop of $54 billion.

Finance Minister Shunichi Suzuki said that the government's intervention on Sept. 22, which likely cost an additional 2.84 trillion yen $20 billion, had a certain effect and was a warning to speculators who were behind the yen's slump to its 24 year low against the U.S. dollar.

Market watchers said deposits can be tapped for immediate use in stepping into the market. There is a limit to what they can do with foreign reserves if the intervention by Japanese authorities is short-lived.

I've never felt our ammunition for intervention is limited, said Masato Kanda, vice-finance minister for international affairs. He said there were various ways to prevent such a scenario.

The Finance Ministry did not disclose which assets were used for the recent intervention.

When Japan intervened in late September, the U.S. dollar dropped by around 5 yen in a short span of time from the 145 yen zone. It rebounded after trading above the psychologically important 145 yen line on Friday, despite caution about another intervention.

The yen's weakness comes amid the possibility that the monetary policies of Japan and the United States will differ on each other.

The cheaper yen is seen as a boon to exporters as it boosts their overseas profits in yen terms. It also inflates import costs, a headache for resource-poor Japan at a time of surging fuel costs and raw material prices blamed for Russia's war in Ukraine.