What is the purpose of the country s foreign exchange reserves? How much does Japan generally keep??

Forex Experts! Forex information, ECNIB forex platform.

What is the purpose of the country's foreign exchange reserves?

The first point: Taking China as an example, China adopts a compulsory foreign exchange settlement system, which means that the foreign exchange imported and exported by enterprises must be subject to the management and constraints of the State Administration of Foreign Exchange.

In the international market, the US dollar is the main trading instrument, ** is a currency recognized by all countries, so a country must ensure sufficient foreign exchange reserves in order to guarantee payments abroad.

The second point: In the foreign exchange market, the exchange rate of the country is affected by supply and demand.

In order to maintain stability, the country's governing bodies can intervene through their own foreign exchange reserves.

For example, taking the current renminbi as an example, it is currently facing huge appreciation pressure, and from the perspective of supply and demand, it is because the demand for renminbi is excessive, which is necessary for the central bank to buy dollars and throw out renminbi to balance.

Point 3: A large part of a country's ability to pay debts is reflected in its economic strength, and economic development is the foundation. Foreign exchange reserves are the most direct embodiment of the ability to guarantee.

The fourth point: foreign exchange reserves represent the assets of China's central bank, and the more foreign exchange reserves, the more assets of the central bank. The more our country has economic support for conducting international affairs.

At the same time, when there is an international financial crisis, China will be more able to face it. For example, in the Asian financial crisis in 97, countries announced currency depreciation, and China, in the spirit of a responsible major country, announced that the RMB would not depreciate. This is based on foreign exchange reserves!

Foreign exchange external payment:

1. Enterprises import foreign exchange purchases.

Including enterprise import goods, foreign investment, etc.

2. Individual foreign exchange purchase.

In fact, one of the main functions of the synthesis is: there is food in the hand, and there is no panic in the heart.

Because China does not implement a floating exchange rate, it is pegged to a limited float in several currency pairs.

In order to keep the exchange rate stable, the central bank may have to use its foreign exchange reserves.

For example, if the RMB is facing depreciation relative to the US dollar, proving that there are too many RMB in circulation and too little US dollar and too little foreign currency, in order to stabilize the exchange rate, the central bank will throw out the US dollar and ** RMB, so that the RMB circulating in the market will be less, and the exchange rate balance with the US dollar will be restored, and then the role of foreign exchange reserves will be revealed.

Now the RMB is facing appreciation pressure due to a huge surplus, and the inflow of too many US dollars, the central bank either lets go and let the RMB appreciate naturally, but too violent appreciation obviously has a negative effect, the central bank can only make the appreciation within its own controllable range, in order to maintain the exchange rate, relative to too much US dollars, it can only issue the corresponding RMB to balance, which makes the circulation of the RMB more flooded, and there is internal inflation. This is the dilemma that central banks are facing now, where appreciation and inflation coexist.

To solve this problem, it may be necessary to solve it from the institutional side, that is, to change the compulsory foreign exchange settlement system, so that foreign exchange can be kept abroad and the inflow of dollars will be blocked.

Hope you are satisfied!

Japan announced that the balance of foreign exchange reserves at the end of July was US$100 million, a decrease of US$100 million from the end of June, and a decrease for three consecutive months. From the perspective of the type of assets held, U.S. Treasury bonds are $100 million, foreign currency deposits are $100 million, and $100 million. As a symbol of a country's economic and financial strength, foreign exchange reserves are the material basis for making up for the country's balance of payments deficit, resisting financial turmoil, stabilizing the country's exchange rate, and maintaining the country's international reputation.

For developing countries, it is often necessary to hold higher than the usual level of foreign exchange reserves.

Extended Materials. The functions of foreign exchange reserves mainly include the following four aspects:

First, adjust the balance of payments and ensure external payments;

The second god socks, intervene in the foreign exchange market, and stabilize the local currency exchange rate;

Third, maintain international credibility and improve financing capacity;

Fourth, it is necessary to enhance comprehensive national strength and resist financial risks.

A certain amount of foreign exchange reserves is an important means for a country to carry out economic adjustment and achieve internal and external balance. When there is a deficit in the balance of payments, the use of foreign exchange reserves can promote the balance of payments; When there is an imbalance in the domestic macroeconomy and the aggregate demand is greater than the aggregate supply, foreign exchange can be used to organize imports, so as to adjust the relationship between the aggregate supply and the aggregate demand and promote the macroeconomic balance. At the same time, when the exchange rate fluctuates, foreign exchange reserves can be used to intervene in the exchange rate to stabilize it.

Therefore, foreign exchange reserves are an indispensable means of achieving economic equilibrium and stability, especially when economic globalization continues to develop and one country's economy is more vulnerable to the economic influence of other countries. Generally speaking, the increase of foreign exchange reserves can not only enhance the ability of macroeconomic regulation and control, but also help to maintain the credibility of the country and enterprises in the world, help to expand the international market, attract foreign investment, reduce the financing cost of domestic enterprises, and prevent and resolve international financial risks. The appropriate level of foreign exchange reserves depends on a variety of factors, such as the status of imports and exports, the size of external debt, and the actual utilization of foreign capital.

Foreign exchange reserves should be kept at an appropriate level based on the benefits of holding them, the comparison of costs and the situation in these areas.