Yen depreciation temporarily dropped to the 123 yen level for the first time in 6 years and 3 months at the BOJ's limit operation

 In the foreign exchange market on the 28th, the yen depreciated against the dollar, and at one point, it hit the 123 yen level for the first time in 6 years and 3 months since December 2015. In the morning of this day, the Bank of Japan held a "limit price operation" to buy unlimited government bonds by designating a specific yield in order to curb the rise in long-term interest rates. It seems that the movement to sell yen and buy dollars has spread.



The limit price operation has been held for the first time in about a month and a half since February 14. The yield on Japanese 10-year government bonds also rose to 0.24% in response to the rise in long-term interest rates in the United States, which was triggered by a rate hike on the 16th. As the BOJ approached the upper limit of about 0.25%, the BOJ set the yield on 10-year government bonds at 0.25% and notified the market that it would buy unlimitedly. Government bonds are in a relationship where the price goes down as the yield goes up. The 0.25% specified by the Bank of Japan was higher than the yield actually traded in the market and there were no bids.



The depreciation of the yen is accelerating and long-term interest rates are rising due to the tightening of monetary policy in the United States. The yen exchange rate against the dollar entered March, and the yen has been depreciating by about 8 yen. Yields on 10-year Japanese government bonds have risen by more than 0.2% since mid-March.


The Bank of Japan has decided to limit the long-term interest rate to about 0.25% as part of its monetary easing policy. As the Bank of Japan moves to curb interest rates with a limit operation on the 28th, it is possible that the yen will depreciate further in the future as the interest rate differential between Japan and the United States is widening.

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