Markets Are on Low as Winter Holiday Season is Here, But Japanese Yen is Rising

Markets Are on Low as Winter Holiday Season is Here, But Japanese Yen is Rising

December 28, 2022 0 By Wiley McDermott

As the New Year’s festivities are approaching fast, Forex markets across the globe are expecting to be quiet.

As the market is perfectly set up for a weeklong break, the focus now will be on the recent opinion issued by the Bank of Japan’s officials.

The bank has decided to increase the yield ceiling, which has sent the Japanese Yen higher than its expected price.

Following this outcome, experts have predicted that after the New Year’s holidays, when the market will return to its normal operations, there will be high buying pressure on Yen.

This means high liquidity will be present in the market on the short Yen supply. Moreover, this market condition will also force Yen to execute sharp fluctuations in terms of its price.

So those investors who are willing to earn big in a shorter span of time must be ready to go big on buying Japanese Yen.

This Rapid Move by the Bank of Japan Has Surprised Everyone

Experts are not only surprised, but they have also appreciated this timely and brave decision taken by the Bank of Japan.

The Bank’s top leadership has modified its strategy to manage Yen’s yield curve. The Bank has expanded the range for long-term Japanese yield trade.

The Governor of the Bank of Japan has said the current move is a step in the right direction to smooth the functioning of Japan’s bond market. He further added that this current move would make the trade easy for investors rather than stressing out the investors.

On the other hand, some market players have criticized this move as they look at things differently.

Critics have pointed out that as inflation is expected to rise dramatically in the near future, the Bank has also decided to announce a $200bn package to protect the country’s economy.

So, the recent decisions made by the Bank of Japan will do nothing, but it will increase the overall prices next year.

BOJ’s Governor Kuroda Remained Firm on His Decision

Kuroda said that the bank would retain this policy seamlessly. His decision has taken the market by storm.

The market is surprised by such claims because Kuroda’s term of Governorship is expiring in April 2023. So, deciding the future beyond April 2023 is not his mandate.

The new governor of BOJ is due to be appointed in April next year. Experts are sure that Japan’s inflation rate will be much higher in the upcoming years. To cope with this high inflation rate, BOJ will further tighten its policies, and the current policy might not stand.

But it is also worth mentioning that the current change in the yields has also changed the price perspective for investors.

Japan is amongst the world’s leading countries that have offered the highest numbers of Japanese bonds to investors and offer offered higher yields.

If yields go out of the range, this could lead to a serious economic crisis for the world’s largest debt market. However, the start of the New Year will clarify the overall picture.

Currently speaking, all the Forex markets across the globe are declining. USD/JPY performance is also expected to be poor.

Experts have also predicted that the U.S. mortgage sector will crack under an increasing inflation rate.

However, the current move of high range for yields has helped the bank of Japan to get rid of the long-lasting crisis it was following. But the future remains uncertain.

Will the new governor of the bank of Japan bring in a change in the policy or continues to go on with the same policy? Only time can tell us.

Despite all these future possibilities, now is the time to go after the Japanese yen because of its competitive prices.

The upcoming New Year will be critical for the price of the Japanese yen.