The USD is recording new highs for the week against the Japanese yen - BBH

Global Currency Strategy Team at Brown Brothers Harriman & Co. (BBH) provides a brief analysis of today's BOJ decision to buy more long-term JGBs. 

Key quotes:

“Many observers have been speculating that the BOJ is tapering or moving closer to the exit.  A week ago, BOJ Governor Kuroda told a Davos audience that the inflation target is getting closer.  Many participants bought the yen.  We took the BOJ's word that it had not changed policy.  The fewer JGBs it was buying was a consequence of the shift to "yield curve control" in 2016.” 

“The BOJ's actions today should help reinforce its message and this appears to be responsible for the dollar getting closer to JPY110 after having approached JPY108.25 a week ago.  The BOJ did two things today.  First, as the 10-year yield was approaching 10 bp, the upper end of its acceptable range, the BOJ offered to buy an unlimited amount of 10-year bonds at 11 bp.  It did this twice last year.” 

“Second, it increased the amount of 5- to 10-year bonds it bought in its normal operation to JPY450 bln (~$4.1 bln), an increase of JPY40 bln from its last offering.  Recall that in the middle of the middle of the week, the BOJ increased the amount of 3- to 5-year bonds it was purchasing.”