— Japan June FX Reserves $1.271 Trln Vs May $1.278 Trln
— Japan June FX Reserves Post 2nd M/M Drop In Row

TOKYO (MNI) – Japan’s foreign reserves fell to $1.271 trillion at
the end of June from $1.278 trillion at end-May, posting a second
straight decline, hit mainly hit by declines in prices of Treasury
notes, Ministry of Finance data showed on Friday.

The nation’s foreign reserves hit a record high of $1.307 trillion
at the end of January.

Yields on Treasury’s 10-year notes, which move inversely to prices,
rose to 1.65% at the end of June from 1.56% at the end of May, led by
the unwinding of flight-to-safety asset flows.

This more than offset positive effects of rises in price of gold
and the euro.

Meantime, prices of spot gold rose to $1,597 per ounce at the end
of June from $1,560.51 a month earlier, while the euro surged to $1.2667
from $1.237 at the end of May.

Japan’s forex reserves remain the second largest in the world after
China’s, which stood at $3.305 trillion at the end of March.

At the end of last month, Japan’s foreign currency reserves stood
at $1.20 trillion, IMF reserves at $15.58 billion, SDRs at $19.58
billion, gold at $39.33 billion and other reserve assets at $477
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.

Japan spent some Y9.09 trillion on dollar-buying intervention in
the final quarter of 2011. The first action came on Oct. 31, when the
yen hit a record high of Y75.32 versus the dollar, which was followed by
more yen selling from Nov. 1 to Nov. 4.

Last 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 G7 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
** MNI Tokyo Newsroom: 81-3-5403-4835 **

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