The Bank of Japan caused an uproar in the money market recently. Because they changed their financial strategy this time. At first they kept interest rates below 0% until they changed by increasing the Yield Curve (yield curve is a visual representation of a bond’s interest rate) on debt securities on a large scale
Japan, as I have made in the previous article, is a country with a stagnant economy. But this time the governor of the Bank of Japan Haruhiko Kuroda’s ( Japanese banker and a former Ministry of Finance government official ) changed his strategy much differently.
Although the Bank of Japan has kept the yield on its 10 year bonds over the 0.25% cap, which has caused some distortion in the shape of the yield curve. The Bank Of Japan decided that now was the right time to fix that and improve market functioning by increasing yields at a rate of more than 0.4%. This made the Osaka Exchange to stop their operations in accepting debt purchases
The Effect of Japanese Policy
- The effect of this policy was that the Yen rose 2.7% against the US Dollar after the Bank of Japan announced a very loose monetary policy change.
- Another effect arising from increasing yields on debt securities is rising inflation in Japan which causes interest rates to rise as well
- People have to find ways to be able to obtain financial protection from buying bonds or looking for other alternative investment instruments
Because of this policy, maybe the government wants to suppress people’s desire to invest so that money in the community can circulate for business and government development. This might be a stimulus for the world of investment and Cryptocurrency might be one of the investment solutions.
