— Japan Dec FX Reserves $1.296 Trln Vs Nov Record $1.305 Trln
— Japan Dec FX Reserves Post 1st Monthly Fall in 3 Months

TOKYO (MNI) – Japan’s foreign reserves fell to $1.296 trillion at
the end of December from a record high of $1.305 trillion in November —
the first fall in three months — as Tokyo refrained from yen-selling
intervention last month, Ministry of Finance data showed on Wednesday.

The MOF has said Japan did not intervene in the forex market
between Nov. 29 and Dec. 28 after having spent Y9.01 trillion on selling
yen between Oct. 28 and Nov. 28.

Japan intervened in the foreign exchange market on Oct. 31, when
the yen hit a fresh life-time high of Y75.32 versus the dollar.

The drop in December reserves was also due to the weaker euro
against the dollar and lower gold prices, a MOF official said.

Japan’s forex reserves remain the second largest in the world after
China’s, which stood at $3.20 trillion at the end of September.

At the end of last month, Japan’s foreign currency reserves stood
at $1.22 trillion, IMF reserves at $17.18 billion, SDRs at $19.75
billion, gold at $37.67 billion and other reserve assets at $464
million.

Japan’s forex reserve data 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
Ministry of Finance to prevent a steep appreciation or depreciation of
the yen exchange rate.

This year Tokyo also conducted currency market intervention in
August and March, with the latter operation forming part of a
coordinated move by the Group of Seven industrialized nations to aid
Japan in the wake of the March 11 earthquake disaster.

That intervention was the first concerted G-7 forex action since
September 2000, when the euro came under heavy selling pressure 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 Japanese
government’s large-scale forex intervention to sell yen for the U.S.
currency — the first government intervention in over six years — in a
bid to prevent the yen’s rapid rise from hurting exporter profits and
thus a sustained economic recovery.

Before the large-scale intervention to sell a total of Y2.125
trillion for the 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: 81-3-5403-4835 **

[TOPICS: M$J$$$,M$A$$$,MAJDS$,M$$FX$]