The Bank of Japan announced a reduction in the amount of government bond purchases at the start of the Tokyo market this week, leading to a temporary surge in the yen’s value. USD/JPY initially rose to around 155.96 in the morning but sharply declined to the 155.50 level after the announcement. However, it gradually rebounded afterward, reaching around 155.90.
There is a view in the market that the Bank of Japan made this announcement to curb the depreciation of the yen. However, the recent weakening of the yen has been driven by the yield differentials between Japan and the US, and the fluctuation in domestic bond yields has not been significant enough to reverse this trend. Ultimately, what matters for yen depreciation measures is a fundamental increase in policy interest rates. It will be important to observe how foreign investors react to this move by the Bank of Japan.
Additionally, it’s advisable to pay attention to any statements or comments from Bank of Japan officials and other related parties. If these comments lean toward a hawkish stance, they may further support the effectiveness of reducing government bond purchases.
Looking ahead, economic indicators such as Canadian housing permits for March and Germany’s current account balance for March will be released in the international markets. Amidst the anticipation for tomorrow’s US producer price index and the day after tomorrow’s US consumer price index, today’s market lacks significant catalysts.
In terms of speaking events, a dialogue between Jefferson, Vice Chair of the Federal Reserve, and Star, President of the Federal Reserve Bank of Cleveland, is scheduled. Both have shown cautious remarks regarding rate cuts in the past, potentially providing support for the dollar.
Keep an eye on the movement of the Japanese yen during New York trading hours. Also, Bitcoin has shown a sharp rebound today, so I’m also monitoring currency movements.
