Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank expresses his take on the impact of the Bank of Japan (BoJ) bond purchases on the Japanese Yen.

Key quotes

“The Bank of Japan’s (BoJ) decision to allow higher JGB yields had spontaneously been interpreted as the beginning of the end of ultra-expansionary monetary policy not only by me.“

“It seemed to be the general interpretation. In the meantime the market no longer seemed to be 100% certain whether that was correct. Because the BoJ justified its explanation with purely market-technical reasons. USD-JPY temporarily traded with a 134 handle.”

“However, in particular the fact that Japanese central bankers will have to defend the new upper limit for JGB yields with even more determination resulted in a reversal. USD-JPY is once again trading at levels around 131.00 (while I write this), so roughly where the currency pair was trading following the BoJ decision.”