TOKYO (Financial Times) -
Japanese foreign exchange reserves fell by a record amount in September and China’s dipped closer to $3tn as the surging dollar hit two of the world’s most significant pools of central bank assets.
Japan’s foreign reserves dropped by a record $54bn to $1.24tn after authorities spent nearly $20bn last month to intervene in currency markets to stem the yen’s fall.
The decline was also driven by the falling value of the foreign bonds in Japan’s portfolio. In unusual remarks on the foreign exchange rate by a prime minister, Fumio Kishida told parliament on Friday that “sharp, one-sided yen declines are undesirable”.
Japan’s foreign reserves are at their lowest level since 2017, as markets resumed testing the yen’s ¥145 level against the U..S dollar. The foreign reserves of emerging markets in Asia have declined by more than $600bn in the past year, the biggest decline on record, Standard Chartered wrote in a note. FX reserves cover in months of imports has deteriorated “to the lowest level since the global financial crisis for [emerging markets] Asia-ex China,” said Standard Chartered.
“Against this backdrop, central banks may choose a more judicious use of FX reserves going forward.” In China, total foreign exchange reserves were $3.029tn in September, data from the State Administration of Foreign Exchange showed, down from $3.055tn a month earlier and their lowest level this year.
China’s reserves, the largest of any country in the world, have come under scrutiny following the sharp depreciation of the renminbi on the back of a stronger dollar and interest rate rises in the U.S.