The Central Bank of Japan increased its foreign exchange reserves by 1.7 percent in April to hold the highest amount ever at $1,135.5 billion.
The official reserve assets held in different currencies and gold, as well as SDRs at the IMF, rose above the previous record of $1,118.12 billion.
The overall decline of interest rates in the world helped inflate Japan’s reserve assets, resulting from higher bond prices. Additionally, the recent appreciation of the euro against the US Dollar increased the value of Japan-held financial assets denominated in euros.
After the devastating earthquake that hit Japan in March this year, the Japanese monetary authorities intervened in the currency market to help stabilize the Yen. The Bank of Japan spent 692.5 billion yen for their part in the March 18 joint dollar-buying intervention by the Group of Seven industrialized economies.
On March 17, the Yen hit a record high against the US dollar (76.12) following speculative trading and expectation of a repatriation of funds back into the country.
In order to maintain the same exchange rate in the case of increased demand for the Yen, the Bank of japan can sell more Yen and purchase the foreign currency, which will increase the sum of foreign reserves. In this case, the domestic currency’s value is being held down as its supply increases.
Recently there has been concern that the BOJ could intervene once again. Since April, USDJPY has been falling, meaning the Yen has been appreciating against the Dollar. However since last week, the greenback has made some gains against the Japanese currency which has lost its appeal as a refuge.
Today there are no major economic data to be released from japan, so any effects on the yen will be triggered by the US Dollar affected by any US data. Later today US core CPI is scheduled to be released.
This past week USDJPY rose to as high as 81.33 from last week’s low of 79.55.