Sun. Sep 25th, 2022

The Japanese yen is nearing its weakest ranges since 1998, and authorities have hinted they will take steps to stem the currency’s decline.

Ahead of the Bank of Japan rate determination later this week, CNBC discusses whether Japan’s central bank could presumably shift further from its ultra-loose monetary policy as the Federal Reserve maintains its hawkish stance, signaling More aggressive rate hikes to come support .

The widening rate spread has caused the yen to weaken massively, with the Japanese currency down around 25% in the twelve months to date.

Last week, the Bank of Japan reportedly conducted an international trade “check,” according to Japan’s Nikkei newspaper, a transfer largely seen as preparation for formal intervention.

The so-called check, as the Nikkei described it, involves the central bank “inquiring into the characteristics of the international trade market” and is widely seen as a precursor to physical intervention to protect the yen.

The issue of physical intervention in currency markets is not discussed, analysts point to yet another reason for the yen’s weakening: the Bank of Japan’s yield curve fitting (YCC) policy, a diagram used once in 2016, which caps 10-12 month Japanese Executive Bonds yields around 0% and promises to favor an unlimited amount of JGB to protect an implicit limit of 0.25% around the model.

The yield curve modifies policy targets to bring inflation in Japan to a planned 2%. On Tuesday, Japan reported that core inflation rose 2.8% from twelve months ago in August, the…

Source link