Japan's foreign exchange reserves fell for the first time in two months to USD 1.303 trillion at the end of February, but remained the world's second-largest, the Finance Ministry said Wednesday.
The figure declined after hitting a record-high of USD 1.307 trillion in January.
The drop in foreign exchange reserves, which includes convertible foreign currencies, gold and International Monetary Fund (IMF) special drawing rights, was mainly due to the declining market value of its US government bond holdings, which were affected by higher interest rates in the US, the ministry said.
As of February 29, foreign currency reserves stood at USD 1.22 trillion, gold at USD 43.55 billion and IMF reserves at USD 16.82 billion. The reserves are closely monitored for evidence of how Japanese authorities are managing vast foreign currency holdings, as the actions have significant impact on currency exchange rates and global bond markets, particularly in the US government bond market.
The ministry has said it did not intervene in currency markets between November 29 and February 27 to stem the yen's rise after spending JPY 9.09 trillion between October 28 and November 28, including the biggest ever single-day intervention on Oct. 31, when the Japanese currency hit a postwar high of JPY 75.32 against dollar.
Japan is the only country with foreign reserves of more than USD 1 trillion besides China, whose holdings hit a record of USD 3.18 trillion at the end of December, according to the latest comparable data. China has been the world's biggest holder of foreign reserves since 2006 by overtaking Japan.