Vanguard, a major bond investment fund management company, warned that the Yen could fall to 170 Yen per USD if the Bank of Japan’s (BOJ) anticipated monetary policy changes in July fail to boost Japanese government bond yields. Recently, the Yen dropped past 161 Yen per USD, its lowest since 1986.
The Yen’s sharp decline has pressured the Japanese Ministry of Finance to consider selling foreign currency and urging the BOJ to scale back its extensive government bond-buying program, a key component of Japan’s loose monetary policy. An increase in Japanese government bond yields, driven by reduced bond purchases, could attract investment back into the Yen.
The BOJ, currently purchasing 6 trillion Yen ($37 billion) in government bonds monthly, will announce its plans to cut this program on July 31. Ales Koutny, head of international interest rates at Vanguard, which manages $1.7 trillion in assets, suggests that if the BOJ only slightly reduces its bond purchases to 5.5 trillion or 5 trillion Yen, the Yen could weaken to 170 Yen per USD.
Koutny’s view is shared by many investors who foresee further depreciation of the Yen if the BOJ’s measures fall short of market expectations.
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Source: Vietnam Insider