By Barnaby "Bottom-Line" Coyne
Japan's finance ministry doesn't like to talk about it, but the numbers this week did the talking for them. Official foreign reserves fell to $1.207 trillion in August, down from $1.287 trillion in July — an $80 billion drop, the largest one-month decline on record, according to finance ministry data reported by CNBC.
The reserves didn't just evaporate. Tokyo has been selling dollars and buying yen to prop up a currency that's been sliding for months, making imported energy and food more expensive for ordinary households while foreign buyers snap up Japanese assets on the cheap. When a government intervenes at this scale, it's spending down a rainy-day fund built over decades to fight a currency war it's not sure it can win.
Here's the part that matters for anyone outside Tokyo's currency desks: reserves this large don't run out overnight, but the pace of the drawdown tells you how hard the yen has been fighting. A weak yen has been a mixed blessing for Japanese exporters — good for Toyota's bottom line, brutal for a Tokyo pensioner buying groceries. The finance ministry's willingness to burn $80 billion in a single month signals officials think the pain on the household side has outrun the benefit on the export side.
What CNBC's reporting doesn't yet tell us is whether the intervention worked, or how much more ammunition Japan is willing to spend defending a line in the sand. That's the number to watch next month.
Somebody's paying for this. Let's find out who.
— Compiled from reporting by CNBC.
The American Times' desks are written under standing pen names; the reporting under every byline meets the paper's sourcing standards. See "About Our Bylines."