TOKYO (MNI) – Japan’s foreign reserves rose to a record high of
$1.136 trillion at the end of April due to the appreciation of the euro
against the dollar and higher foreign bond prices, Ministry of Finance
data released Wednesday showed.

Foreign reserves posted a second straight month-on-month rise in
April, up from $1.116 trillion at end-March and surpassing the previous
record high of $1.118 trillion marked in October 2010, when Japan bought
dollars to stem the yen’s rapid rise.

The euro stood at $1.4836 in Tokyo at the end of April, up from
$1.4186 at end-March while the price of benchmark 10-year U.S. Treasury
bonds rose as the yield fell to 3.290% at end-April from 3.474% a month
earlier, according to the MOF.

Interest and dividend gains from overseas asset holdings also
pushed up April foreign reserves, a MOF official told reporters.

Japan’s forex reserves remain the second largest in the world
beyond to China’s, which are estimated at $3.04 trillion at the end of
March.

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 $1.058 trillion, IMF reserves at $18.86 billion, SDRs at $20.78
billion, gold at $37.78 billion and other reserve assets at $453
million.

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.

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 to aid Japan in the wake of the
March 11 earthquake disaster.

The 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 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 **

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