Japanese banks boost dollar liquidity to record $1.25 trillion

Japan's three largest banks—MUFG Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank—have accumulated a record amount of foreign currency liquidity to prepare for potential dollar shortages among corporate clients. By the end of June, foreign currency deposits and market-captured funds reached $1.25 trillion, an 18% increase from March 2025.

This surge represents an increase of over $190 billion in 15 months, a magnitude of growth not seen in Bank of Japan statistics since at least 2010. MUFG Bank led the effort, increasing its reserves by 32% to $466 billion.

The accumulation of these reserves is driven by geopolitical tensions in the Middle East, specifically the ongoing conflict between the United States and Iran following attacks in February. Banks are positioning themselves to provide dollars to international companies if market turbulence makes financing difficult to obtain. Additionally, Japan's commitments to invest in the United States as part of a tariff agreement will require significant dollar holdings.