AUDJPY 20th JANUARY 2023
The fall in the yen exchange rate cannot be separated from the BoJ's move to maintain the yield curve control (YCC) policy at 0.5%. YCC is a BoJ policy that holds 10-year bond yields close to 0.5%. When the yield starts to move away from 0.5%, the BoJ will purchase bonds. The purchase means the BoJ is injecting liquidity into the economy. The policy was widened last December from 0.25%, which surprised market participants and became a 'plot twist'. But something similar did not happen again this week.
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