The Japanese government is interested in weakening the national currency – the Japanese Yen. One of the ways to do that is to purchase US bonds. This stem is expected to exert extra pressure on the Japanese Yen, simultaneously stimulating the export-oriented Japanese economy. This is what the Japanese prime Minister thinks on the matter.
The government is planning to spend up to ¥50 trillion on those bond purchases, which is roughly equal to $558bn.
The experts of JPMorgan Securities Japan assume that the amount may well be twice as big. If this is the case, the Japanese Yen will see even bigger weakening. By the way, the Japanese currency has already depreciated by 125 over the last 4 months. The Japanese economy has seen a 3rd consecutive recession since 2008.
For Ben Bernanke, Chairman of the Fed, this step is strong move supporting the US bond market. It may increase the bond yield, which has been showing a bearish tendency since the very beginning of 2013.
At the same time, expert still believe that the US public debt will keep growing in the near future.
Forex.
The chart below, courtesy of , reflects the current state of affairs in the market of the USD index. The price is trading within the 79,00-80,99 range.
