Japan has intervened in foreign exchange markets at least three times this year, battling strength in the yen stemming from the euro zone's debt woes and a stuttering global economy.
Finance Minister Jun Azumi has said repeatedly that Japan will not hesitate to take decisive steps against speculative currency moves to protect exporters from a firmer yen.
The government "needs to consider that rises in currency reserves led by intervention mean increases in Japan's borrowing as the nation has to issue financing bills for intervention, and it should also consider unrealized losses," said Tohru Sasaki, head of Japan rates and FX research at J.P. Morgan Chase Bank in Tokyo.
"I doubt how effective currency intervention is ... but Japan may intervene again if the yen surges to a record high (vs the dollar). The global economic situation is focused on Europe's debt troubles and it's not about the yen," Sasaki said.
Japan's foreign reserves rose to $1.3 trillion at the end of November compared with $1.21 trillion at the end of October, the Ministry of Finance said on Wednesday.
Japan held onto a good part of the dollars it bought via intervention in deposits, the data showed, signaling that the government is still struggling to find the right timing to buy US Treasury bills with the dollars, given the risk of rises in Treasury yields.
Among components of the foreign reserves, deposits more than tripled to $45.3 billion by the end of November from the end of October and were the highest since January 2010, while securities increased by 5.7 percent.
The ministry declined to comment on the reason for the rise in deposits but a senior official said bond yield volatility was behind that large accumulation of deposits.
Japanese authorities spent a record 9.09 trillion yen on currency intervention in the month to Nov. 28, the ministry said last month.
As Japan is estimated to have spent nearly 8 trillion yen on Oct. 31 alone, a record for a single day, the monthly amount suggests the ministry covertly spent about 1 trillion yen in the days that followed, probably to keep markets more on edge.
Japan's efforts helped the dollar stay relatively steady around 77-78 yen in the past week, off its record low of 75.31 yen hit just hours before intervention began in October.
In August, Japan sold 4.5129 trillion yen in currency intervention, far exceeding the 2.125 trillion yen it sold on Sept. 15 last year.
Japan also used 692.5 billion yen in March when the Group of Seven (G7) countries carried out their first coordinated foreign exchange intervention in more than a decade, after the yen shot up against the dollar in the wake of the March 11 earthquake and tsunami.
Income from coupon payments also contributed to the growth in foreign reserves in November, the ministry said.
