Soaring foreign reserves pose serious risks

Japan's foreign currency reserves amounted to about $1.01 trillion as of the end of February, topping $1 trillion (about 105 trillion yen) for the first time. The risk of holding such a large amount of foreign currency reserves is considerable, and steps should be taken to reduce the reserves.

Japan is the second country in the world to surpass the $1 trillion line following China, which holds about $1.5 trillion in foreign currency. Next on the list comes Russia and India. Japan is the only developed country to hold such vast foreign currency reserves.

Such reserves are held by a government and a central bank for settlement of trade transactions and for payment of overseas debts.