Bank of Japan Received a “Christmas Gift” from the U.S. Fed; Yen Weakens Hitting Resistance

The Japanese yen has sold off a bit against some unexpected events occurred in favor of this currency. Now, the Japanese Central Bank, BoJ continues to float on the current in the hope that the U.S. Fed will turn around and take a breather before it starts climbing to the rocks.

The Bank of Japan was probably the most pleased with J. Powell's dovish attitude last week, as it got a hope to somehow get through the current cycle in a relatively orderly fashion. Although it is obvious that Powell has overdone the easing tone (as a result, some experts now expect as many as three rate cuts during 2024, which imply a distinctively deflationary environments — something that has no clear confirmation so far), but the BoJ decided to leave everything as is, with rates remaining negative and government bond purchases continue. Inflation still persists though, with Tokyo inflation excluding energy and food products in October-November remaining at 2.7%, the core inflation of the Bank of Japan has slightly decreased, but still keeps at 3%.

The volume of government debt purchases has not changed much recently and keeps to the tune of ~¥5 trillion SMAV in 4 weeks, the total BoJ portfolio is ~¥587 trillion, i.e. more than half of the issued government debt.