In 2022, the collapse of the Japanese yen will not subside. Japan has been in a terrible situation since the Kishida administration, and the Japanese yen has always been sold. The Bank of Japan is also stubbornly inducing the depreciation of the yen, and there is suspicion that it intends to destroy Japan intentionally. Meanwhile, on April 20, 2022, the Bank of Japan announced that it would carry out a limit operation to buy unlimited government bonds at the specified yield from the 21st to the 26th. And the influence is reflected in the exchange rate.
What is a limit operation?
A limit operation is a market operation that buys unlimited government bonds from financial institutions at a yield specified in advance by the Bank of Japan. It is carried out when restraining the rise of long-term interest rates in the market. Introduced for long-term interest rate manipulation within the new monetary policy framework announced in September 2016. Under the new framework, we have set a target to induce the yield of 10-year government bonds, which is an indicator of long-term interest rates, to around 0%. When the limit operation is carried out, the BOJ will buy government bonds at a higher yield than the market, so the price of government bonds will rise and long-term interest rates will fall.
Impact on the forex market
From the day when the limit operation was entered, the pace of Japanese yen selling clearly settled in all currency pairs. USD / JPY, EUR / JPY, GBP / JPY, AUD / JPY, CAD / JPY, CHF / JPY, etc. are getting heavier, and price movements are beginning to polarize within each currency pair.
It is a USD / JPY 1-hour chart as of April 22, 2022. The USD / JPY has reached 129 yen, but the top price has become heavier since the 20th. It is completely in the range, and once the surge has subsided. However, the US dollar is scheduled to raise interest rates multiple times this year, and the surge may begin again the following week.
EUR / JPY 1-hour chart as of April 22, 2022. I have reached 140 yen, but the top price is obviously getting heavier. Although it has fallen, it has already suggested that the euro will raise rates around the summer, not as much as expected. As with the USD / JPY, the surge may start again the following week.
GBP / JPY 1-hour chart as of April 22, 2022. After the 20th, the top price has become heavier. And on the 21st and 22nd, a big plunge occurred and it turned to a downtrend. The pound may continue to fall for some time as there are no plans to raise rates so far. GBP / USD also continues to fall.
AUD / JPY 1-hour chart as of April 22, 2022. After the 20th, the top price has become heavier. And on the 21st and 22nd, a big plunge occurred and it turned to a downtrend. The Australian dollar has no plans to raise rates so far, so it could continue to fall for some time. The AUD / USD has also continued to fall and the EUR / AUD is on a strong uptrend. The Australian dollar has been too strong for about two months and could be on a downtrend for some time. CAD / JPY may have a similar flow.