Bank of Japan Keeps Making its Loosest-Ever Monetary Policy Slightly Less Loose in Tiny Steps at Slowest-Ever Snail’s Pace

Which devalued the yen by a Third-Worldish 30% against the USD in two years as other central banks hiked in big increments and started QT.

By Wolf Richter for WOLF STREET.

Scraps NIRP. Citing “the virtuous cycle between wages and prices,” with both rising, and citing its thingy that “the price stability target of 2 percent would be achieved in a sustainable and stable manner,” the Bank of Japan today scrapped its negative interest rate policy by hiking its short-term policy rate by a whopping 10 basis points from -0.1% to a whopping 0.0%, the first rate hike, if you can even call it that, since 2007.

Kind of scuttles yield-curve control, what’s left of it, without getting rid of it completely. The BOJ said: If there is a “rapid rise in long-term interest rates,” it would make “nimble responses,” for example, by increasing the purchases of Japanese Government Bonds [JGBs]. So yield curve control isn’t quite out the window, it’s just watered down further.

Ends purchases of equity ETFs and J-REITs, though it had essentially already stopped buying them in 2023 as the Nikkei stock index was soaring toward all-time highs for the first time since 1989.

Slows purchases of corporate paper and corporate bonds and will end them altogether in about a year, it said.

Doesn’t scuttle QE. It said in its Statement that it would “continue its JGB purchases with broadly the same amount as before,” namely about ¥6 trillion per month (about $40 billion). It said it “will conduct the purchases while taking account of factors such as market developments and supply and demand conditions for JGBs.”

But the net increases of its total assets have been small, averaging only ¥1.7 trillion ($11 billion) per month over the past 12 months, after maturities, reduction in loans, and other factors.

So these are minuscule movements by a central bank that had, and still has, one of the most aggressive monetary policies that led to its holding over half of the huge pile of JGBs and becoming the largest holder of Japanese equities.

The Bank of Japan was the last central bank still clinging to a negative interest rate policy, an absurdity that was invented in Europe and by 2014 had spread across central banks in Europe. The Bank of Japan copied it in milder form in 2016, when it cut its short-term policy rate from 0% to -0.1% and kept it there until today.

Yields have risen, but only a little. Over the years, the negative policy rate caused the 3-month government bond yield to trade in the range of -0.1% to -0.25%, and briefly in late 2016 as low as -0.4%. All yields up through the 1-year yield traded in the negative over those years.

In anticipation of the whopper of a rate hike, the three-month yield rose a hair above 0% last week and today is right at 0%. All yields above 3 months are now in the positive.

The 10-year yield dipped today to 0.73%, after trading close to 1% in late October and early November 2023.

The Japanese yield curve remains relatively steep at the long end, with the 40-year yield at 1.9%:

Back in 2016 when it joined the NIRP absurdity, the BOJ also instituted “yield curve control,” where it threatened to purchase “unlimited” amounts of government bonds to keep the 10-year yield in a tight band near 0%.

The loosening, if you can call it that, started in December 2022 – by which time other central banks had started hiking their policy rates in big increments and had turned to QT to combat surging inflation – when the BOJ “shocked” markets by lifting the yield band’s ceiling to 0.5%. In 2023, it lifted the ceiling to 1%. And in October 2023, it discarded that explicit ceiling.

You can see what’s happening here: A central bank making its loosest-ever monetary policy just slightly less loose in tiny increments at the slowest-ever snail’s pace, and that trend continued today.

Today’s micro-moves were widely telegraphed and leaked so that there would be no surprise, and there was no surprise.

And of course, the BOJ patted itself on the back, saying in its Statement that its mega-QE program, Yield Curve Control, and negative interest rate absurdity “have fulfilled their roles.”

These policies have crushed the yen, which is currently trading at ¥151 to $1, down from a range of ¥105 to ¥110 in the years through early 2021, representing a Third-Worldish 30% devaluation of the yen against the USD. Which has turned Japan into a budget-traveler’s paradise, and which has impoverished the Japanese when they go spend their crushed yen-income overseas.

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  85 comments for “Bank of Japan Keeps Making its Loosest-Ever Monetary Policy Slightly Less Loose in Tiny Steps at Slowest-Ever Snail’s Pace

  1. dougzero says:

    And of course, the BOJ patted itself on the back
    Cue the band: “mission accomplished”

    • NBay says:

      Call them stupid if you want, but they aren’t stupid enough to play F-150 and McMansion.

      That’s our own “American Exceptionalism” combined with “freedom” in action there.

  2. danf51 says:

    Yet things don’ seem that bad in Japan. Of course, how would I know how things really are ? It would be interesting to see how many Japanese household savers participate in the carry trade in one way or another.

    Some people might look at the CB in Japan and think, “well we can do the same thing in the US”, spend borrowed money to our hearts content.

    Is the difference in Japan the degree of savings the Japanese consider normal and prudent ?

    Is it possible to understand anything ? But, at least according to ZH, foreigners keep buying our debt, so all is well.

    • MustBeADuck says:

      “ Is the difference in Japan the degree of savings the Japanese consider normal and prudent ?”

      I think the difference is the current status of the dollar as the world’s reserve currency. Emphasis on the word “current”.

    • Einhal says:

      I think the real difference is that Japan still produces more than they consume, so financial chicanery can work for a while.

      We don’t, in many ways. Sure, we produce a lot, but we consume a lot too.

    • Declan says:

      They’ve had problems with inflation, but so far nothing that has caused major political or social instability.

      Notably, the price of gold in yen has almost doubled since COVID.

  3. fx_poet says:

    I always wonder how a central bank can be “nimble”. they are the least nimble organizations on the planet!

    • Wisdom Seeker says:

      The public pronouncements are glacial but that’s just the storefront. Out back in the alley where the trading happens, they absolutely can slam or bomb any market on a moment’s notice. For instance, some of the hairsbreadth spikes in 2022 on Wolf’s Yen-per-Dollar chart represent “nimble” unannounced BOJ interventions. There are undoubtedly a fair number of overleveraged FX traders who failed to respect that nimbleness and lost their whole portfolio as a result.

    • grimp says:

      They are plenty nimble when cutting rates in a crisis

      • Brian says:

        That’s exactly when they should be nimble. They should move slowly when things are stable so as to not cause a new crisis.

        They probably don’t need to move this slowly which says that they want a state of loose money and high inflation for a while longer yet.

  4. LordSunbeamTheThird says:

    The weird thing about the weak Japan yen is that it seems to pull reality along with it. Literally the same things are cheaper in Japan…!
    I’ve just been looking at a Nvidia card and its 44,000 yen in Japan and 80,000 yen in the UK. The Kobo Nia is similarly discounted in Japan by about 25%.
    I mentioned to an American I know living over there that Walmart have some 699 dollar MacAir deal and he should get his family to send one over and he just said the yen is so ridiculously weak that would now cost him a fortune.
    Let alone the McDonalds thing.

  5. Argus says:

    Europe can no doubt expect fewer Japanese tourist this summer, which will no doubt please some – until the loss of revenue and service jobs becomes apparent.

    • Zoroto says:

      Japanese are already not travelling overseas. The cost for them is prohibitive.

      But it’s great that Japan is getting almost as cheap to travel to as South East Asia. Love seeing all the backpacking Westerners with dirty clothes and tattoos, they really bring some culture to this place. /s

      • Albert Comenius says:

        Japan is historically known to have the lowest proportion of its citizens that ever travel internationally. And it’s not mostly a financial consideration. The rest of the world does not present as civilized or as philosophically and spiritually sophisticated or mature.

    • KGC says:

      My on hand experience is that the vast majority of Asian tourists in Europe have been Chinese for, at least, the last 10 years.

  6. ru82 says:

    FWIW……The more investment people that are on bloomberg TV that I have listened to, the more they say rates are not restrictive. In a survey of small businesses, they said they are not having a hard time at paying back loans because inflation has allowed them to raise prices and consumers are paying higher prices.

    • Wisdom Seeker says:

      This is the heart of the problem. Current rates aren’t high enough, and current QT isn’t fast enough, to constrain the economy enough to slay inflation.

      • ru82 says:

        Yep. Blue Chip companies issued the largest amount of monthly bonds ever in January. If they thought rates were restrictive, they would have waited the FED cut rates.

        That being said, about 90% of all assets are held by the people in the upper 50% of the income brackets. They own virtually all the assets, and a good chunk of that, at least half of it, is fixed income. Now, if you look at the liabilities, the bottom 50% of income earners have no assets, but they own over half of the debt.

        That is why Elizebeth Warren wants rates cuts because the bottom 50% do not benefit from high rates as they do not receive extra fixed income from high rates, they only have higher debt payments.

        • Albert Comenius says:

          The bottom comes out behind either way. They pay for poor governance through high cost of credit or through having their purchasing power depreciated through monetary inflation.

          Way of the world. Never stop comprehensively educating yourself about humanity and its history. Then choose wisely how you want to interact with society.

  7. Mike G says:

    Tokyo (and Osaka) was consistently in the top 5 most expensive cities in the world in international surveys for as long as I can remember. Last year it was down to 60th out of 174, less expensive than Seoul and way less than Hong Kong or Singapore.

    • Harvey Mushman says:

      Hard to believe! Times change.
      I was working with an engineer from A.O Smith for a couple of weeks. He told me he was in Japan on business back in 1990. He said after work, the Japanese host company would take him to a Sushi bar. The Sushi was served on the bodies of naked woman. The woman were decorated with ornately with gold leaf.

      • MustBeADuck says:

        The past is a foreign country. They do things differently there.

      • 91B20 1stCav (AUS) says:

        McQueen’s Ghost – hm. A VP of Mitsuboshi Belting, following a successful factory tour, treated me to a Kobe beef lunch in Nagoya in ’87. As we rode the local back to the Shinkazen station, he related his concerns about his recently-married son and wife, living at his home, ever finding an affordable place of their own… (8 million stories in the Naked City…best).

        may we all find a better day.

        • 91B20 1stCav (AUS) says:

          addendum-as I recall, the yen dropped from the 160-range to the 130’s on the flight over, then proceeded to fall further-this certainly didn’t aid our negotiating positions on that go-round…

          may we all find a better day.

  8. The Struggler says:

    The Yen has a clear path above its current cycle peak. It can easily reach 160.

    If that level breaks, we’re looking at the 1980s for reference?

    I am too young to remember the economic environment. Just another rhyme to the ‘70-80s era.

  9. Redundant says:

    That 151 area always freaks everyone out.

    “ A point to note is that this critical zone of 150.20/151.95 has led to a slew of verbal interventions by Ministry of Finance officials in the past 1 year to talk down the strength of the US dollar against the JPY as well as real intervention by BoJ to sell US dollars on 21 October 2022”

    Crap, now I have to look at old bookmarks as to why that’s spooky

    • Declan says:

      >Crap, now I have to look at old bookmarks as to why that’s spooky

      Japan is the largest foreign holder of US government debt.

      If they sell US bonds off bigly to prop up the yen it will put pressure on yields for US debt to rise.

  10. Desert Dweller says:

    Perhaps this will finally mark the beginning of the end for MMT?

    • eg says:

      Perhaps you could explain yourself? The description of fiat monetary operations of floating currencies still holds.

  11. ChS says:

    “one of the most aggressive monetary policies that led to its holding over half of the huge pile of JGBs and becoming the largest holder of Japanese equities”

    At what point does this just become state capitalism?

    • phleep says:

      ” … the largest holder of Japanese equities”

      At what point does this just become state capitalism?”

      Become? Became! At what point quite a ways back did this (past tense) become state capitalism?

      Now, in this new post-post war epoch, I am looking at The other bastions of the western world (ex-USA), England and Germany, and asking he same questions. And I am wondering when it will penetrate (further) to the core: the USA. Where (geographically or assets-wise) to run to?

      • Aaron says:

        I think anyone who’d like to unwind this countris fiscal and monetary policy 20 or 100 years isn’t gonna find other developed countries to satisfy them.

        I think a good solution for them is to encourage climate change, then move to antartica. I think, if I live a long time, ill get some boats and gear and go start a new country.

    • MM says:

      What % of the Japanese bond market does the BOJ own at this point?

      • The Real Tony says:

        Buying sand in all the deserts around the world and getting it all shipped to Japan would be a lot more lucrative and profitable.

      • C says:

        I haven’t seen the stats on this but before 2020, it was something like 60%+. Japan has been dealing with the Asian financial crisis and deflation since ~1997. I think the 3 decade nominal gdp growth rate there is sub 0.75%.

    • Cervantes says:

      Capitalism always exists in symbiosis with an active, pro-development state.

      • ChS says:

        Agreed, but if over half of stocks and bonds are own by the state, a line has been crossed in my mind.

        • Cervantes says:

          It’s certainly fair to ask whether the BOJ policy has and will continue to have negative consequences for Japanese capital markets, investment selection, productivity growth, etc. and whether the BOJ actually has the capacity to monitor its credit risks and participate in governance.

    • Glen says:

      State capitalism is a complex and fairly subjective or at least widely defined term. For example, China who owns sometimes very small stakes in tech company, Tencent as an example, but have special powers with golden shares probably fits it, as well of course of the traditional definition of nationalized companies.

      I wonder if it makes sense to consider what degree of control they have with their position versus just their exposure?

      • Kent says:

        Nazi Germany had a state capitalism. The government didn’t hold much if any financial stakes in companies. But the CEO knew he had to follow orders.

      • ChS says:

        Glen, agreed the definitions can be a bit vague, as I would argue that China is more market socialism, but in the end it doesn’t really matter. Your broader point that the degree of control is probably the most relevant. I tend to think the Chinese government can exert a fair amount of control over business, just as Nazi Germany did.

        In the specific case of Japan, at what point does the state decide to exert it’s control? If the government owns a controlling interest in various businesses, when do they start putting people on the board of directors? I find it very concerning the Japanese economy is relying on the self-restraint of the government to avoid a complete takeover when they apparently have the means to do it.

        Also of interest to me, is this how the transition from monopoly capitalism to state control happens as envisioned by Marx, etc?

    • Aaron says:

      You mean the traditional meaning for communism? State owned means of production.

      It’s not that, but it’s not good either. Figuring out the implications for anything when the gov and market are too intertwined is difficult, or at least leads to wide debate on causes and effects. See socialist countries and how they fail to effectively fix anything. So it would have been better to keep it separate.

      • ChS says:

        “You mean the traditional meaning for communism? State owned means of production.”

        No, I don’t mean communism, state capitalism is not the same as communism in my mind. State owned means of production, in theory, is not the same as state controlled. But I do worry once the Rubicon of state ownership has been crossed, the control part is inevitable

  12. LouisDeLaSmart says:

    Hmmm…this goes in line with the recent TSMC investments in Japan. Devalue the Yen, make products more competitive on market, bring in investments, spur tourism…The inflation is at ~2% for now…Could it be that they are trying to devalue the yen?
    It is one of those moves in chess…Either it’s genius or stupid beyond belief. Hard to tell.

  13. Markymark says:

    Silly me. I had always thought that a major leading industrialized country such as japan interest rates would always be influenced by its national debt, to its gdp. Apparantly debt to gdp has nothing to do with interest rates as evidenced by what has happened in japan these last 30-40 years. The higher the debt, to gdp, the lower the interest rates until now. Having said this, apparantly, the US is following japan down the path of excessive debt to gdp model which leads to fiat currency devaluation? I dont know im still trying to figure how electronic tokens like bitcoin get a value placed on them… that has been surging. strange times indeed.

    • Ryan Merritt says:

      If you observe the Realpolitik of the USA and Japan through the way their financial systems are intertwined, you can see that Japan running their monetary policy the way they do serves a certain purpose in the “western world” (north America, EU, Aus) that no other vassal state serves.

      It is also clear that the the USA in its leading role in the west cannot do the same thing Japan is doing, in regards to debt to GDP & interest rates.

      Its very complicated and not because its genius but rather its all insiders who know how it was set up and take advantage of it and us plebs end up finding out after the fact.

      But if you want to know more, start with researching “what is the yen carry trade”, even though its no longer a thing, as I hinted above.

      The quick “all you need to know” takeaway is that when Japan makes a big policy change that goes against a decade or more of being its standard policy then it means some big restructuring is going on behind the scenes.

    • Einhal says:

      Ultimately, a huge percentage of people have the belief right now that “there’s no better place to put your money in than U.S. tech stonks, no matter how the valuations.”

      Can that last indefinitely? are P/Es of 30-80 the new normal?

      • Cas127 says:

        New normal, just as “perpetually poised for panic selling”, is the new normal.

        With idiot PEs, few holders actually believe in them, and are always one step from the door.

      • Bs ini says:

        Indefinitely no but longer than one can reasonably imagine

        • MustBeADuck says:

          The market can stay irrational longer than you can stay solvent. Tale as old as time.

        • Einhal says:

          Of course, it’s just incredible to me that not only are “markets” priced as thought cuts have happened, but as though rates have been cut back to zero!

          Even if the Fed does keep rates three times, 4.75% is still way too high of a risk-free rate to justify today’s stock prices.

          As Augustus Frost used to post, “Never before have people paid so much for so little.”

  14. phleep says:

    I’m told, big union negotiations and wage hike demands in Japan set the stage for this rate hike. Sounds familiar. Many accuse big earners of greed, but the masses are key here too.

    • Zoroto says:

      Less than 20% of all employees in Japan are part of these unions, which only cover the “big” companies. More than 80% work for SMEs which will get jack of raise as usual.

  15. Bman says:

    The BOJ has effectively monetised more than half the government’s huge debt. That’s an incredible accomplishment.

  16. Hairy Gaijin says:

    Check the gold in yen 5 year chart, holy smokes
    most people I know here are getting tiny raises if any, nothing compatible with the inflation, which is not the 2% BS the BOJ is spouting. Food and energy are crushing. Everyone is starting to do their own tire changes, oil changes. Cutting corners and scaling back big purchases. Saving graces are healthcare while not free (we pay 30%) is fixed, tuition is affordable, mortgage rates are very low. Real estate does not appreciate at all except in Tokyo, Osaka, and now resort areas. But every product is up 30%+ . Family of 3 spends equivalent of 800 USD/mo. eating extremely frugally, no steaks, no big cuts of meat, or fish either. Income has been flat forever.

  17. The Real Tony says:

    China needs a leader like Putin to raise their interest rates ten percent in one day thus fixing all the damage done in the last 30 or so years. It worked for Russia and Mexico is the poster child showing much higher interest rates lead to endless prosperity for everyone. No wonder everyone is flocking to Mexico.

    • Escierto says:

      You may have been sarcastic but in fact, Americans ARE flocking to Mexico. People in nice Mexico City neighborhoods are complaining about Americans driving up prices. There are whole towns in Baja California populated by Americans.

      • 91B20 1stCav (AUS) says:

        …hm. And all along I thought the only issue was Californians flocking to other states (fewer of us left who recall other states/countries flocking to California…or, in other words: “…what the flock!?!…”).

        may we all find a better day.

  18. Glen says:

    The position seems odd on the surface. It’s hard to imagine they have all the necessary resources given their size. If so, it seems like a devaluation would drive up internal prices for consumption but also for items exported. There are obviously pros and cons to strong versus weak currencies so it that were they are consciously making a tradeoff?

  19. Redundant says:

    This bit from BBC, October 2022, sums up some of the yen depreciation stuff we’re seeing again, and the inflation dynamic is an increasingly interesting factor in regard to real wages, real everything. A lot of the nominal sugar high globally, after pandemic is probably going to be the straw that kills the camels.

    “ However, Japan’s consumers have seen their purchasing power halved over the last decade. Ten years ago, 10,000 yen would buy an item worth $132, but today it only gets you something worth $67.
    That is a major problem because average salaries in Japan have hardly risen in over three decades.”

  20. roark says:

    The Japanese government moving to negative interest rates destroyed their economy. The cash market for dollar/yen since 1900 When you look at the long-term you can see that the prospects for a major dollar rally cannot be understated. The catalyst will most likely be war.Unfortunately for Japan, the prospects of war on the horizon are genuine, facing both North Korea and China. The dollar should rise into 2025. Just a few years ago, nobody imagined when the day would come when the Bank of Japan finally ended its negative interest rate experiment butting up against MAJOR overhead resistance of 150-160 per dollar looking at the Yen futures Even turning to the 10-year bonds, here, too, we see that 2024 was a turning pointThe Bank of Japan has finally given up on this stupid negative interest rate experiment conceived in the minds of academics consumed by Keynesian economics. Lastly, the Bank of Japan has been raising rates for the first time since 2016. It took them that long to figure out their experiment failed. At Tuesday’s meeting, the BOJ delivered its first rate hike in 17 years ending its extraordinarily free money regime by removing formal bond yield caps and purchases of stock funds Adding more confusion to the pot, they do not grasp why the Nikkei is near record highs. That’s because people do not comprehend that assets rise as the currency declines, for this is what we call CURRENCY INFLATION for shares with international value. However, with rising tension in Asia with the prospect of war, major institutions are diversifying moving assets outside of Japan, which impacts the currency a declineJapan is realizing that with negative interest rates, they are going to be unable to keep rolling the debt as new buyers turn away. The banks, forced to hold negative interest rates as reserves, will now suffer losses as rates rise and the value of their reserves decline rapidly. Beware of Japanese banking shares. They may appear to rise because they will make profits from rising rates, but they do not have a long-term profile.

  21. Zoroto says:

    > Citing “the virtuous cycle between wages and prices,” with both rising, and citing its thingy that “the price stability target of 2 percent would be achieved in a sustainable and stable manner,”

    “Japan’s real wages, adjusted for inflation, in January were down 0.6 percent from a year earlier, marking the 22nd straight month of decline, as salary gains continued to fall short of price rises, official data showed.”

    This is a direct quote from an article in The Mainichi, not sure if I can post a link here.

    The average Japanese has been suffering. The fat cats are getting fatter, though, but that’s all the LDP and BOJ cares about, since there will be no kicking the LDP out of power or protests of any kind from the populace.

    TBH, Japan feels like a very poor country once you are out in the inaka. Crumbling housing and infrastructure.

    • NYguy says:

      I was driving around Kyushu, very apparent how depressed things were. Absolutely beautiful countryside. I’d buy property in a heartbeat if I could get a visa with it. But they would rather self destruct in isolation – they don’t understand island economies with large populations need a constant infusion of money and goods to survive because the domestic resource base is too small. Hell, they stopped breeding. Can’t get any more doom loop than that.

      • Wolf Richter says:

        “Hell, they stopped breeding. Can’t get any more doom loop than that.”

        Fertility rate in Japan is higher than in 15 other countries, including a bunch of European countries.

        Country Name 2020
        In 2020:
        1 – Korea, Rep. 0.84
        2 – Hong Kong SAR, China 0.87
        3 – Puerto Rico 0.90
        4 – Singapore 1.10
        5 – Malta 1.13
        6 – Ukraine 1.22
        7 – Spain 1.23
        8 – Italy 1.24
        9 – Bosnia and Herzegovina 1.24
        10 – Macao SAR, China 1.24
        11 – Moldova 1.28
        12 – Bermuda 1.30
        13 – North Macedonia 1.30
        14 – Cyprus 1.31
        15 – Greece 1.34
        16 – Japan 1.34

        • All Good Here Mate says:

          Maybe it’s because I live in Central Florida and don’t have proper perspective, but Puerto Rico at #3 is stunning. Kinda hard to believe.

        • Happy1 says:

          True, but Japan is 40 years ahead of most of these countries with its low birth rate, Italy and Spain excepted. The rest are catching up very fast on declining population now.

        • elbowwilham says:

          I don’t get the point here. Most of the world is heading off a demographic cliff.

        • Zoroto says:

          Japan’s population is declining by 1 million people every year. Maybe percentage-wise it’s not the highest, but it is by far the highest absolute number.

        • Wolf Richter says:

          China, whose population has started to decline, will surpass Japan shortly in absolute numbers.

      • Zoroto says:

        I am building a house in Kyushu. I got the top-of-the-line kitchen from a major Japanese maker, not some fancy Italian stuff.

        According to the maker, I am literally the first customer for this kitchen in the entire prefecture….

        This just shows how bipolar the Japanese economy is between the haves and have nots.

  22. SRK says:

    Loved title of this Article.. I think that said it all.
    BOJ should have done little bit more to send a strong signal. IF they really wanted to send it. :)

    Both Jan and Feb CPI reports didn’t make any diff on US Stocks. Matter of fact today 19-Mar-24 we have another ATH for S&P500.
    So called WSJ whisperer Nick Timiraos still saying 3 rate cuts. “Fed officials have a bias to cut rates but need a credible justification to get started”.

    Its funny how Market experts were calling for 7 cuts in 2024 when FED itself said 3 cuts. Now they are very confident about 3 starting from June. Let’s see tomorrow.
    Like many, I am looking forward tomorrow’s SEP, Presser and Wolf’s analysis. Hope our Central Bank not just talk the talk but also walk the walk.

    • jon says:

      Tomorrow would be an interesting day.
      Asset prices are flirting with ATH. Financial conditions are ultra loose. Going by WR’s articles, inflation is going up and up again. If FED feels the same then Powell should come with ultra hawkish statement not some loosy goosy ones to please every one and keep supporting the insane valuations of all assets bubble.

  23. Tom K says:

    UUP and USDU ETFs are low risk trades to take an advantage of the weakening of Yen against USD.

    • jon says:

      Yen has already weakened a lot against USD.
      There is more probability of FED cutting rates than that of BoJ hiking rates since FED FFR are at 5% plus.
      It basically can mean that USD would become weaker against JPY over time.

  24. DownFed says:

    I’ve always considered the “real” interest rate (interest rate – inflation rate) to be the “real” measure. The nominal rate doesn’t mean that much to me. A negative real rate still exists. Who’s going to buy a 0.1% bond in a 2% inflation environment? Only a buyer with a printing press to manufacture the money to buy it with. When they exit negative real rates, that’s when I’ll take note and watch the show.

    • Wolf Richter says:

      It’s more complicated. If you buy a 10-year bond, the coupon interest is locked in for 10 years, and you’ll get the same amount of interest every year. But inflation varies. So you need to take a guess to see what inflation will average out over the next 10 years.

      But Japan doesn’t have much of a bond market anymore, with the BOJ and government entities and government-controlled entities holding the vast majority of bonds.

  25. WB says:

    Considering Japanese culture, and there productivity, I really don’t worry about Japan. Still the 4th largest economy in the world.

    Now consider American culture as of late…

    …hedge accordingly.

  26. Redundant says:

    From September 2022, this is probably still relevant to Yen tinkering. The current tweak of rates is obviously Kabuki noise. I think the key issue in Japan and globally is watching real wages and devaluation. That’s also a massive issue with America’s deficit tsunami and the future value of cash.

    “By remaining steadfast in its commitment to zero yields, the Bank of Japan may have sacrificed the ability to control its own destiny. This sentiment was reflected in a statement by Haruhiko Kuroda, the central bank’s governor: “If we want to stop the yen from weakening only by adjusting interest rates, we would need huge rate increases, and it would cause significant damage to the economy.”1 “

  27. Redundant says:

    Demographics and currency devaluations. Fascinating Mr. Spock

    Feb 27 (Reuters) – The number of babies born in Japan fell for an eighth straight year to a fresh record low in 2023, preliminary government data showed on Tuesday, underscoring the daunting task the country faces in trying to stem depopulation.
    The number of births fell 5.1% from a year earlier to 758,631, while the number of marriages slid 5.9% to 489,281 — the first time in 90 years the number fell below 500,000 — foreboding a further decline in the population as out-of-wedlock births are rare in Japan.

    • Wolf Richter says:

      There are 15 countries with slower fertility rates than Japan:

      Country Name 2020
      1 – Korea, Rep. 0.84
      2 – Hong Kong SAR, China 0.87
      3 – Puerto Rico 0.90
      4 – Singapore 1.10
      5 – Malta 1.13
      6 – Ukraine 1.22
      7 – Spain 1.23
      8 – Italy 1.24
      9 – Bosnia and Herzegovina 1.24
      10 – Macao SAR, China 1.24
      11 – Moldova 1.28
      12 – Bermuda 1.30
      13 – North Macedonia 1.30
      14 – Cyprus 1.31
      15 – Greece 1.34
      16 – Japan 1.34

  28. BeeKeeper says:

    I wrote here back in 2022 that you were wrong, when JPY was around 130 and new governor was about to enter BOJ. Specifically, that it will take several months to exit QE and JPY will spike back up, contrary to your optimism.
    Now again opposite, JPY will get stronger from here onwards, if other central banks will not start increasing interest rates. Most of them are on hold and slowly reversing the course, see CHF, BRL, watch today MXN.

    I bought JPY contrary to your judgment call and thanks for the tip last time. This site is slowly becoming Jim Cramer’s Show. You let your feelings cloud your judgement. Even though your analyses is correct, you express wrong judgments on bottoms/tops. [FeelingsJudgement???]. This is the worst personality trade for trader/investor. Maybe skip the judgement calls and do only macro analyses??? Mostly you seems to be correct on those.

  29. Redundant says:

    Found this old tidbit in my archives: just curious

    “ The risk is this: Every business day, the Bank of Japan is spending tens of billions of dollars worth of yen to enforce governor Kuroda’s yield curve interest rates suppression program. To put this into perspective: In the UK, when the little crisis over liability driven pension investing in late September happened, the Bank of England spent around $5 billion. The BoJ does that before breakfast.”

    “What is going to happen if suddenly Japanese yen denominated rates become rather attractive? Well, a lot of this money may be repatriated and the result of that repatriation will be a rise in volatility in markets we can’t really identify now. So the risk of a volatility upsurge is considerable. I think the time is getting ripe for a big change in Japanese rates structure and therefore in interest rates and in the risk presented to bond holders worldwide.””

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