Japan’s foreign securities holdings dropped by $75.6 billion from April to May 2026, signaling the likely use of overseas assets to fund a record currency intervention aimed at supporting the weakening yen [1, 2].
Japanese authorities carried out a record intervention in the currency market for the month ending May 28, totaling ¥11.73 trillion, or approximately $73.4 billion [1, 2]. The intervention followed action on April 30, when authorities bought yen after the currency weakened to about ¥160.72 per dollar [1].
Japan’s total foreign reserves declined to $1.09 trillion by the end of May 2026, while foreign currency deposits held steady at about $162 billion during the same period [1].
Market participants estimate that roughly 70% of Japan’s foreign reserves are invested in U.S. Treasurys [1]. Data from the Federal Reserve’s Treasury custody suggest that Japan sold U.S. Treasurys as part of the efforts to raise funds for the yen purchases [1].
Earlier in 2026, U.S. Treasury Secretary Scott Bessent warned that volatility in Japan’s bond market "could spill over into Treasurys," underscoring concerns about large-scale Treasurys selling by Japan [1].
The sharp drop in foreign securities and the record scale of yen buying in May reflects concerted efforts by Japanese authorities to curb the yen’s decline after it reached problematic levels in late April [1, 2].
