Japanese Finance Minister Shunichi Suzuki stated on Friday that currency intervention should be approached cautiously, following reports that Tokyo had used significant foreign exchange reserves for recent yen-buying actions.
"Currency intervention should consider its necessity and effectiveness," Suzuki remarked during a news conference following a routine cabinet meeting.
Although intervention can be used to curb excessive volatility in the foreign exchange market, such actions "should be conducted in a cautious manner," Suzuki stated.
Data from the Ministry of Finance on Friday showed that Japan's foreign exchange reserves had decreased to $1.23 trillion by the end of May, down by $47.4 billion from the previous month, primarily due to a reduction in foreign securities holdings.
Japanese authorities do not disclose the specific composition of the national foreign exchange reserves, but most foreign securities holdings are believed to be U.S. Treasury bonds.
"It's almost certain that Japan sold part of its U.S. Treasury holdings to conduct the dollar-selling, yen-buying intervention," said Takashi Ueno, a senior economist at NLI Research Institute.
Data from the Ministry of Finance last week indicated that the authorities spent ¥9.79 trillion (approximately $62.85 billion) in market intervention to support the yen, widely believed to have occurred at the end of April and the beginning of May.
