Source: Bloomberg

Author: Ken McCallum

On the one hand, it is necessary to protect the yen exchange rate, and at the same time to slow down the pace of increasing bond yields. Japan's official control is difficult to see on Wednesday's foreign exchange and bond markets on Wednesday.

On Wednesday morning, the Supreme Officials of the Ministry of Finance of Japan issued the most severe warning to date, showing that the official had prepared for the foreign exchange market to curb the devaluation of the yen.At noon, the Bank of Japan is preparing to enter the bond market to slow down the 10 -year Treasury yield rising to 1%.

The purchase operation of the temporary bonds of the Bank of Japan is quite abrupt, because just 24 hours ago, the Bank of Japan only canceled the upper limit of 1%of the bond yield.In addition, the huge Japanese and American spreads have caused the yen to suffer heavy pressure, and the debt purchase operation also directly conflicts with the efforts of supporting the yen exchange rate.

The result was that the yen rose slightly by 0.3%, close to 1 US dollars against the 151 yen mark, and less than 1 yen from 33 years.The 10 -year Treasury yield rate still rose on the day, and it was only 1.5 basis points at a new 10 -year high of the 10 -year high than the Bank of Japan announced the purchase of the operation.

"The actions of the Ministry of Finance and the Bank of Japan are not synchronized," said Tsuyoshi Ueno, a senior economist at Nli Research Institute.He believes that the key to solve this problem is not in the hands of Japanese officials, but in the future of the United States to cut interest rates."Before that, the official must be patient."

The speculators of the two markets of foreign exchange and bonds have bet that Japanese decision makers are unable to take into account, and the risks are becoming increasingly higher.Excessive depreciation of the yen may push up the import price, which will lead to deterioration of Japan's inflation, and the increase in yields may be prematurely systematically recovered with Japan's economic recovery.

"We are in a state of standby," said the Senior official of Japanese foreign exchange affairs Kanda.This statement is similar to the first day of Japan's first day of intervention in the market a year ago."But I can't say what we will do, and when we will make an overall judgment, and we will make a judgment with a sense of urgency."

Before he published the above statement, the yen set the largest single -day decline since April on Tuesday. Previously, the fine -tuning of the Bank of Japan's upper limit on bond yields did not meet market expectations, indicating that the pace of exit super loose policy may remain slow.

The performance of the Japanese stock market is quite opposite. The Dongzhi Index has reached the largest increase in a year. The reason is that the cost of low loan and weak yen are good for the stock market.

"Yesterday's Bank of Japan meeting caused people to think that long -term interest rates will not exceed 1%for a period of time," said Tomo Kinoshita, global market strategist of Invesco Asset Management."Weak yen is also good for export stocks."

Although the yield of Japan's 10 -year benchmark national bonds has been on July 27 -the day before the governor Shikada and men adjusted the yield curve control for the first time -have doubled since it has risen, but it is still compared to the US 10 -year Treasury bond.The yield is about 4 percentage points.

When traders are constantly trying to push the yield rate, the Bank of Japan seems to slow down.

"Although the Bank of Japan has adopted action to prevent their yields from rising, market participants may want to see a long -term return of 1%," said Keisuke Tsuruta, a high -end fixed income strategist at Mitsubishi Japan.

He added that the purchase operation outside the plan may be the move to make people before the 10 -year bond auction that has received much attention on Thursday.