🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

Yen's Spike Shows Taste of What Comes When BOJ Really Does Shift

Published 2018-01-08, 11:02 p/m
© Reuters.  Yen's Spike Shows Taste of What Comes When BOJ Really Does Shift

(Bloomberg) -- A minor tweak in a regular Bank of Japan bond-purchase operation on Tuesday was enough to send the yen climbing the most in almost a month, even though evidence weighs overwhelmingly against the adjustment signifying anything meaningful.

What the yen’s spike does show is just how big a move will come whenever the central bank does telegraph a fine-tuning in its stimulus program. Tuesday’s gain was as big as 0.5 percent against the dollar, in wake of the BOJ trimming purchases of bonds dated in 10-to-25 years by 10 billion yen ($89 million) compared with its previous operation.

Governor Haruhiko Kuroda said last January, in wake of speculation about the significance of similar mechanical tweaks, that such operational tweaks don’t send any signals on policy intentions. Just in the past two weeks, he emphasized that policy makers are far from their 2 percent inflation target and that Japan’s "deflationary mindset" isn’t easily going away -- no indication of any appetite to scale back stimulus.

Tuesday’s move was minor compared with what happened to the euro on June 27, when traders interpreted comments from European Central Bank President Mario Draghi as a sign that ECB tapering was coming. The euro surged 1.4 percent that day, and has remained stronger ever since.

The prospect of similar appreciation in the yen could itself reduce chances of the BOJ engaging in fine tuning of its policy keeping 10-year government bond yields around zero. Moves like Tuesday’s help explain why Kuroda hasn’t been willing to drop the annual 80 trillion yen bond-buying target from policy statements -- even though the actual purchases are now far below that pace.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.