Global Market: Weak yen lifts Japan's forex reserve surplus to $31 billion in FY25

Japan recorded a surplus of 5.06 trillion yen ($31 billion) from its special foreign exchange reserves account in the fiscal year ended March 2026, marking the second-highest annual surplus on record, according to the country's Finance Ministry, Reuters reported

The strong surplus was driven by the weaker yen, which increased the yen value of income generated from foreign assets held in the reserve account. The account, which is used to manage Japan's foreign exchange reserves and finance currency market intervention, had posted a record surplus of 5.36 trillion yen in the previous fiscal year.

The special account primarily invests in U.S. Treasury securities and is funded through yen-denominated financing bills. Reuters reported that income earned from U.S. Treasuries continued to comfortably exceed borrowing costs due to the wide interest rate differential between the United States and Japan.


The depreciation of the yen further boosted returns when converted into the Japanese currency, contributing significantly to the overall surplus.

Revenue allocated across government accounts
Of the total surplus, 3.13 trillion yen was transferred to Japan's general account as revenue for fiscal 2026.

The Finance Ministry also allocated 1.34 trillion yen to the foreign exchange fund, while 585 billion yen was carried forward as revenue for the special account in fiscal 2026.

Weak yen boosts government finances
The latest figures highlight how Japan's large foreign exchange reserves have benefited from prolonged yen weakness. Higher returns on overseas assets, particularly U.S. government bonds, have strengthened the government's finances even as the currency's depreciation has raised import costs for households and businesses.

Prime Minister Sanae Takaichi has previously said that Japan's foreign reserves have benefited significantly from the weaker yen. She has also discussed the possibility of using part of the reserve surplus to help finance a proposal to suspend the consumption tax on food.

Market impact
The surplus underscores the financial advantages Japan has gained from holding substantial overseas assets during a period of elevated U.S. interest rates and a weak yen. While the announcement is unlikely to have a direct impact on equity markets, it reinforces the government's fiscal flexibility and highlights the income-generating strength of Japan's foreign exchange reserves.


The data could also support sentiment around Japan's public finances, although currency markets will remain primarily focused on the Bank of Japan's policy outlook and future movements in the yen.