Japan's foreign exchange reserves rise in March after intervention

14:50, April 07, 2011      

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Japan's foreign exchange reserves rose to 1,116.03 billion U.S. dollars at the end of March, the Ministry of Finance said Thursday, following Tokyo intervening into currency markets to stem the yen's rapid rise.

According to the ministry, the latest figure for Japan's foreign exchange reserves marked the first month-on-month expansion in five months, helped in part by the end of a lending scheme between the International Monetary Find (IMF) and the government, the ministry said.

The end of the lending program allowed Tokyo to transfer 11 billion U.S. dollars to its reserve assets, boosting March's overall official reserve assets.

Japan spent a total of 8.1 billion U.S. dollars on foreign exchange intervention in March, after the yen jumped to a record high against its U.S. counterpart and was robust against other major currencies, which threatened to further hamstring Japan's fragile export-led economic recovery.

The move was conducted in twine with G7 countries and marked the first multilateral intervention into currency markets since the euro was introduced more than a decade ago.

Japan's foreign exchange reserves consist of securities and deposits denominated in foreign currencies, International Monetary Fund reserves, IMF special drawing rights (SDRs) and gold, and are the second largest in the world after China's.

The March figure was the second-highest figure since October, when official reserves stood at 1,118.12 billion U.S. dollars, according to the ministry's data.

In September Tokyo intervened unilaterally into currency markets for the first time in six years, dumping the yen and boosting the U.S. dollar in order to safeguard its fragile export sector that relies on a weaker yen to make Japanese products more competitive and profitable in international markets.

March's move was similarly motivated as the yen surged in the wake of a devastating earthquake and tsunami, which spurred speculation of heavy Japanese repatriation of funds from overseas investments.

Japan's foreign exchange reserves are being increasingly watched for evidence of how the country is managing its vast foreign currency holdings and the biggest fluctuations usually occur when the Bank of Japan intervenes in the currency market on behalf of the MOF to prevent a steep appreciation or depreciation of the yen.

Source: Xinhua
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