Alpha Trade knew it earlier - the path of depreciation of the yen

[AlphaTrade]

On Friday morning, the Bank of Japan released its latest interest rate decision for April. Data showed that the Bank of Japan kept interest rates unchanged at 0-0.1%. However, in the post-meeting statement and wording, it did not express concern about the continued decline of the yen, and did not See comments or actions that require intervention in the Japanese yen. After the news was announced, the Japanese yen continued to gain strength and hit a low of 156.00 against the US dollar, continuing to hit a 30-year low.

Looking at Japanese economic data, especially the 10-year government bond yield, it is close to the 1% level. According to market theory, the Bank of Japan should let the yield fall back to 1%. But in fact, by adjusting the YCC policy, BOJ will have the opportunity to make the yield exceed 1%, which seems unreasonable. In fact, judging from the current situation, this is relatively beneficial to the Japanese economy.

Japan has been fighting deflation for so many years. In the recent global anti-inflation wave, as the yen continues to fall, Japan's inflation has returned to the policy target of around 2%. This is beneficial to Japan, while the yen continues to fall. The Japanese stock market and assets have continued to become more attractive to investors, and the Japanese economy has regained good growth momentum. Therefore, in the short term, there is really no incentive for the Bank of Japan to intervene in the trend of the yen.

Maybe we will pay attention to one point. The continued depreciation of the yen now affects more Japanese citizens, or only when the depreciation reaches a certain level and has a greater negative impact on people's purchasing power and life, will the Bank of Japan begin to tighten monetary policy to maintain normalcy? Domestic economic activities, otherwise, the temporary central bank's remarks or actions can only be scratching the surface. After all, the interest rate difference between the Japanese yen and other countries around the world is really too big, and the market has no motivation to hold the Japanese yen at all.