Focusing on the recent continued decline in the yen exchange rate, Japan’s Ministry of Finance, Financial Services Agency and Bank of Japan held a meeting on the 10th local time and issued a statement stating that they were worried about the current trend of yen depreciation, emphasizing that they would continue to pay attention to foreign exchange market trends and the impact on the Japanese economy. Influence.
It is reported that the meeting on the 10th was an information exchange meeting between the Ministry of Finance, Japan Financial Services Agency and the Bank of Japan, that is, the Bank of Japan. At the meeting, participants exchanged views on the trend of the Japanese yen exchange rate and its impact on the Japanese economy. According to a statement issued after the meeting, all three parties expressed concern about the recent rapid depreciation of the yen. This is the first time such a statement has been issued after such an information exchange meeting.
The statement also said that the Japanese government and the Bank of Japan will strengthen cooperation, pay close attention to exchange rate market trends and their impact on prices, and will take appropriate response measures when necessary. Japanese Vice Minister of Finance Masato Kanda asked reporters about the possibility of currency intervention , he said that “all options will be considered to respond flexibly.”
The exchange rate of the Japanese yen against the U.S. dollar hit a new low in 20 years and four months on the 9th, once falling to a level of about 134.5 yen per U.S. dollar. After the statement was released on the afternoon of the 10th, the yen exchange rate once rebounded to 133.37 yen per US dollar, but fell to around 134 yen per US dollar in the evening, indicating that the statement had little effect in suppressing the decline of the yen.
Some analysts pointed out that the recent weakening of the yen is mainly due to the widening of the interest rate gap between Japan and the United States. At present, the market generally expects that the Federal Reserve, which is working hard to curb domestic inflation, intends to decide to raise interest rates again at the Federal Open Market Committee meeting next week, while the Bank of Japan is expected to keep interest rates at extremely low levels and increase interest rates at its monetary policy meeting next week. Maintain large-scale monetary easing. The market’s view that a dollar with higher interest rates is more beneficial to investors has accelerated yen selling.
up to date! Japanese government bond futures plummeted, triggering circuit breakers twice, the largest single-day drop in nine years. What happened?
On June 15, Beijing time, Japan’s 10-year government bond futures fell 2.01 yen to 145.58 yen, the largest single-day decline since 2013, and triggered the Osaka Exchange twice at 13:54 and 13:55. circuit breaker mechanism. Subsequently, the Bank of Japan announced that it would continue to purchase Japanese government bond futures delivery notes in unlimited amounts on the 16th and 17th. As of press time, the price of Japan’s 10-year government bond futures is 145.98 yen.
Image source: Yingwei Caiqing
According to the Financial Associated Press, experts have previously warned that the Bank of Japan’s insistent quantitative easing policy has approached the market’s limits.
According to Xinhua Finance, the Tokyo stock market continued to decline on the 15th, with the two major stock indexes falling significantly for four consecutive trading days. The Nikkei 225 stock average price index fell 1.14% in closing; the Tokyo Stock Exchange stock price index fell 1.20%.
The two major stock indexes in the Tokyo stock market opened slightly lower that day. As investors continued to remain vigilant about the possibility that the Federal Reserve would accelerate interest rate hikes, risk aversion operations became the mainstream of the market. The market showed a volatile downward trend that day, and the decline continued to expand.
At the close of trading, the Nikkei stock index fell 303.70 points to close at 26326.16 points; the Topix stock index fell 22.52 points to close at 1855.93 points.
Image source: Wind
The Bank of Japan takes action
Announced the purchase of 2.45 trillion Japanese government bonds
Although the Bank of Japan announced as early as April that it would purchase unlimited amounts of Japanese government bonds, and has recently continued to increase its purchase of government bonds to ensure that it achieves its yield curve control target, the sell-off of Japanese government bonds continues. According to Bloomberg, bond traders are betting that the Bank of Japan will be forced to abandon its pledge to cap yields at 0.25%.
The Bank of Japan’s increased purchases of Japanese government bonds did not prevent the country’s 10-year government bond yields from fluctuating above the 0.25% target ceiling on Wednesday. As of press time, the yield on Japan’s 10-year government bonds is 0.262%.
According to Bloomberg, as domestic inflation rises in Japan, the yen falls to lows, and many central banks continue to raise interest rates, the Bank of Japan is facing increasing pressure. The Bank of Japan will meet this week to decide on its yield curve control policy.
Katsutoshi Inadome, a strategist at Mitsubishi UFJ-Morgan Stanley Securities in Tokyo, said foreign investors were responsible for the sharp drop in Japan’s 10-year government bond futures. “This is a challenge to the country’s yield curve control policy by foreign investors who believe the Bank of Japan will adjust policy. Tensions are rising ahead of the Bank of Japan’s decision on Friday.”
However, while some foreign investors believe the Bank of Japan will shift monetary policy, economists predict that as Japanese bonds and currencyBecause of the yield curve control policy, the higher global inflation is, the more the Bank of Japan has to print. But the more easing accelerates, the harder it will be to hit the brakes when the (inflation) cliff approaches, and the more dangerous it becomes.
The result, Deutsche Bank strategists say, is that we will soon enter a phase of dramatic, unpredictable, non-linear changes in Japanese financial markets. He also pointed out, “If it becomes clear that the market is starting to perceive that the future settlement level of JGB yields will be higher than the 0.25% target set by the Bank of Japan, then what incentive is there to continue to hold bonds?”
Saravelos also raised the following explosive questions: If no investors are willing to continue to hold Japanese government bonds, is the Bank of Japan willing to take over all Japanese government bonds? In this case, where would the fair value of the yen be? What happens if the Bank of Japan changes its stance? The Bank of Japan may want to create inflation, but what if achieving that goal is accompanied by a full-blown systemic collapse? Finally, what happens if the yen loses fiat currency credibility and domestic holders of yen-denominated savings turn to dollars or cryptocurrencies?
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