FX Nugget: What policy normalization? The BoJ is as interventionist as ever….
Markets are stuck in a discussion on the JPY this morning as BoJ governor Ueda and PM Kishida held a meeting allegedly discussing FX developments. Our models continue to signal weakness ahead for the JPY.
Even a move to 1% in the YCC-curve control has NOT allowed the BoJ to become less interventionist. On current trends, 2023 will lead to a new record high in nominal purchases of JGBs.
Pair that with tapering/balance sheet reductions among peers and you have a weakening/debasement cocktail in store for the JPY still.
Chart 1: The Bank of Japan will likely reach a new record for nominal buying of JGBs in 2023