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Japan’s central bank will expand its purchase of 10-year government bonds in this year’s second quarter in an attempt to keep medium-term borrowing costs low, the bank announced last week.
In the year’s first quarter, the bank bought ¥425 billion worth of the bonds four times a month. It will now buy ¥500 billion worth on the same schedule.
The decision came after bond yields exceeded the bank’s targeted upper limit of 0.25 percent, pushed by rising rates around the world.
When that target limit was breached, the bank offered to buy unlimited amounts of 10-year bonds for four consecutive days to drive the rate back down.
The spread between the bank’s low interest rates and higher yields elsewhere dropped the yen’s value by 5.5 percent against the dollar in March, its sharpest plunge since 2016.
On 31 March, the yen was valued at ¥121.8 to the dollar after sinking to a seven-year record low of ¥125.1 earlier in the week.
The currency’s sinking value set off speculation that the government might intervene to prop up the yen, a step not taken since Asia’s financial crisis in the late 1990s.
The government is likely to start talking up the yen if the value falls below ¥125 but not take action unless it falls to ¥130, Shusuke Yamada, head of foreign exchange strategy at Bank of America, told the Financial Times.
The government insists that a weak yen is good for the economy because it makes the country’s exports cheaper abroad. However, the weak currency also makes imports, including energy, food, and factories’ raw materials, more costly at home.
TRENDPOST: As we noted in “Japan’s Central Bank Holds Low Rates in Place” (15 Feb 2022), this is unprecedented. For over a decade, Japan’s central bank has been buying up stocks, bonds and keeping interest rates low as the nation teeters in and out of recession.
Clearly, their strategy is a failure, yet they double down on their incompetence… and get away with it as all Bankster Bandits do in a country near you.
TREND FORECAST: Japan’s economy will remain weak as the global economy continues to slow down. Also, Japan’s largest source of energy is almost 100 percent imported. Thus, the higher oil and gas prices rise, the higher inflation will rise… and the deeper its economy will sink.