The Bank Of Japan (BOJ) is the central bank of Japan, and it has recently become known as the biggest money printer due to its large-scale bond-buying program.
This program, known as "Quantitative Monetary Easing" (QQE), has caused the BOJ's balance sheet to expand significantly since it was implemented.
The Bank of Japan announced its decision to adopt a "Yield Curve Control" (YCC) policy on September 20 and 21, 2016.
Yield Curve Control
YCC is a form of quantitative easing (QE) that involves the BOJ targeting a specific level for long-term interest rates to stimulate economic growth and achieve its inflation target. The BOJ first introduced QQE (Quantitative and Qualitative Monetary Easing) in 2013, and the decision to adopt YCC was seen as a tweak to this policy.
Under YCC, the BOJ announced that it would aim to keep the 10-year Japanese Government Bond (JGB) yield at around 0% by purchasing a certain amount each month. The BOJ's decision to adopt YCC was part of its efforts to stimulate the economy and achieve its 2% inflation target, which it had been struggling to achieve through traditional QE measures.
However, the bank of Japan recently made an announcement, which I will try to summarize.
The Bank of Japan (BOJ) made a surprise decision on Tuesday that allows long-term interest rates to move 50 basis points on either side of its 0% target, wider than the previous 25 basis point band, but has kept its yield target unchanged.
They also increased their monthly purchases of Japanese government bonds (JGBs) to 9 trillion yen ($67.5 billion) per month from the previous 7.3 trillion yen. This will help sustain current monetary easing policies and not signal a withdrawal of stimulus.
More info can be found here: https://www.boj.or.jp/en/announcements/release_2022/k221220a.pdf
The effect of this policy decision is to make the Bank Of Japan still provide large amounts of stimulus, but the money printing machine is no longer running as voluminously. By increasing the band within which long-term interest rates may move and increasing their monthly bond purchases, the BOJ is attempting to sustain its current monetary easing policies. This policy decision may impact the JGB market and other related markets, potentially increasing demand or decreasing supply in the near term.
Summarized
BOJ is lowering the minimum price they're willing to buy for bonds. The yield goes higher & cost of borrowing for the government goes up. However, it's a surprise since they told us they wouldn't do this! Because it's similar to raising the interest rate. Narrator: they did
BOJ has had to intervene multiple times. It is only a matter of time before the consequences of their reckless monetary policy become apparent BOJ is in trouble. They unwittingly move toward their undoing.
So by implementing a yield curve control policy, which involves buying bonds to keep the yield curve in its preferred shape. This policy resulted in the Bank of Japan printing more Yen, which has put downward pressure on the Yen and weakened its value.
To counter this, the Bank of Japan has been forced to intervene in the foreign exchange markets by selling foreign currency reserves, U.S. treasuries, and other bonds to buy back Yen.
This strategy has a finite lifespan; as it is playing out now, the Yen might keep falling as the rules of money take over. If the Bank of Japan keeps going in this direction, the yen's purchasing power will keep diminishing.
What does this mean for bitcoin?
As a result of the Bank of Japan's yield curve management program, market volatility and cryptocurrency demand are anticipated to grow.
Investors who are hoping to profit from the falling value of the Yen may be driving the rising demand for Bitcoin. Investors may choose Bitcoin and other cryptocurrencies as a hedge against the depreciating Yen, despite the fact that Bitcoin is inherently risky. As the Yen declines in value, more institutional investors may get access to the market.