Japan may have dipped into its foreign security holdings, including US Treasuries, over the past month to fund its unprecedented currency intervention efforts. Monday's reserve data from the Ministry of Finance shows that foreign security holdings shrank by $87.8 billion at the end of August compared with the previous month, a decline nearly matching the scale of Japan’s recent buying spree to prop up the yen.

The ministry had already confirmed that authorities deployed a record ¥964 billion in the month through August 26, marking the largest monthly intervention on record, with some operations conducted in coordination with US counterparts. While the data does not provide a detailed breakdown by security type or maturity, market participants estimate that roughly 70% of Japan's foreign exchange reserves are allocated to US Treasuries. The modest pullback in 10-year note prices at end-August versus end-July suggests that valuation shifts only accounted for a small portion of the drop in foreign security holdings.

Where the money came from and how it was used. The gap between the $87.8 billion reduction in overseas holdings and the $96.4 billion intervention figure points to other funding sources, possibly including foreign currency deposits or sales of other assets.