Japanese Foreign Reserves Rise

Japan's foreign reserves stood above $1 trillion in October for the 12th consecutive month. Reserves rose a little more than $4 bln over the course of the month. This largely reflected valuation adjustments. The euro rose roughly a cent against the dollar, and this is partially offset by the decline in asset (bonds) prices. Also in terms of valuation, the price of gold appreciated from $995.75 to $1040. This increase was worth about $1 bln to Japan's reserves. These was also a modest increase in Japan's SDR holdings.

In some ways, these forces behind the rise of Japanese reserves will play out in other countries as well. The dollar's decline boosts the value of non-dollar assets held in reserves. The rise in the price of gold may be important as well. It is not so much that many countries especially in Asia and the Middle East and developing countries in general have large gold holdings, but the magnitude of the move is significant. Lastly, the IMF's SDR allotment will boost overall reserve levels as well.

This assessment works for countries that have been passive, but of course a number of developing countries, especially in Asia and Latam are believed to have intervened and their reserves could be expected to reflect this.

Separately, Japan reported more details about their reserve holdings. As of the end of the fiscal year on March 31, 2009, 23.3% of the securities Japan held in reserves matured in one-year or less. A full half (51%) of the securities mature in 1-5 years, leaving about a quarter of the securities maturing in 5-years or more. Sovereign instruments accounted for almost 69% of the securities Japan holds in reserves.