TOKYO (MNI) – Japan’s foreign reserves rose to $1.116 trillion at
the end of March from $1.091 trillion at end-February, posting the first
month-on-month rise in five months, Ministry of Finance data released on
Thursday showed.

The increase was largely due to the recent change to include loans
to the International Monetary Fund in each country’s foreign reserves, a
MOF official told reporters.

It was also because of forex intervention and the euro’s rise to
$1.4186 at end-March in Tokyo from $1.3763 a month earlier, he said.

Japan’s foreign reserves hit a record high of $1.118 trillion in
October 2010.

Last week, the MOF said the Japanese authorities intervened in the
foreign exchange markets to the tune of Y692.5 billion in March.

The yen-selling intervention was part of a coordinated move by the
Group of Seven industrialized nations, acting in concert to aid Japan in
the wake of the March 11 Tohoku-Pacific Ocean Earthquake and tsunami.

The intervention was the first concerted G-7 forex action since
September 2000, when the euro came under heavy selling as capital flowed
into the U.S. stock market at the peak of the IT bubble.

In September 2010, the reserves were pushed up by the large-scale
forex intervention to sell yen for the U.S. currency that Japan
conducted for the first time in over six years in a bid to prevent the
yen’s rapid rise from hurting exporter profits and thus a sustained
economic recovery.

The country’s forex reserves remain the second largest in the
world, next to China’s, which are estimated at $2.85 trillion at the end
of December.

Foreign exchange reserves consist of securities and deposits
denominated in foreign currencies, International Monetary Fund reserves,
IMF special drawing rights (SDRs) and gold.

At the end of last month, Japan’s foreign currency reserves stood
at $1.041 trillion, IMF reserves at $17.52 billion, SDRs at $21.25
billion, gold at $35.40 billion and other reserve assets at $445
million.

The IMF reserve position was up sharply from $4.7 billion in
February after an international agreement to shift loans to the IMF to
“official reserves assets” from “other foreign currency assets.”

Japan’s forex reserves are closely watched for evidence of how the
country is managing its vast foreign currency holdings.

The biggest changes in Japan’s forex reserves 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.

Before the large-scale intervention to sell a total of Y2.125
trillion for the U.S. dollar on Sept. 15, 2010, Japan had stayed out of
the forex market since mid-March 2004, when it ended its massive
15-month-long yen-selling operation.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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