The pressure of yen depreciation intensifies: the Bank of Japan maintains the benchmark interest rate and reduces the purchase scale of treasury bond, causing market shock

In globalized financial markets, even minor changes in monetary policy can trigger significant market fluctuations. Recently, the Bank of Japan announced after its monetary policy meeting that it will maintain its benchmark interest rate between 0-0.1%, while also predicting a reduction in government bond purchases after the July meeting. This decision quickly attracted widespread market attention, with the yen/dollar exchange rate rapidly falling, approaching its lowest point since the beginning of this year. This event not only reveals the cautious attitude of the Bank of Japan on the path of monetary policy normalization, but also highlights the sensitivity and uncertainty of global financial markets towards the Bank of Japan's policy adjustments.

Firstly, we need to clarify that keeping the benchmark interest rate unchanged by the Bank of Japan does not mean that its monetary policy has not changed. In fact, reducing the purchase of treasury bond is itself a policy adjustment aimed at gradually restoring market interest rates and promoting the normalization of monetary policy. The logic behind this decision is that by reducing the purchase of treasury bond, the balance sheet size of the central bank can be reduced, thus reducing the degree of intervention in the market and making the market interest rate closer to the natural level.

However, this decision by the Bank of Japan did not fully meet market expectations. Although the market generally expects that the Bank of Japan will gradually reduce the purchase scale of treasury bond, the market is uncertain about the specific reduction time and scale. This uncertainty has led to market volatility and investor concerns, thereby affecting the exchange rate trend of the Japanese yen.

Judging from the trend of the yen exchange rate against the dollar, the yen exchange rate fell rapidly after the Bank of Japan announced to reduce the purchase of treasury bond bonds. This trend reflects market concerns and uncertainty about the policy adjustment of the Bank of Japan. Investors are worried that with the reduction of the purchase scale of treasury bond, the monetary policy of the Bank of Japan will gradually tighten, which will lead to the rise of market interest rates, which will have a negative impact on economic growth and asset prices.

In addition, the decision of the Bank of Japan has also drawn market attention to the economic situation in Japan. Although the Bank of Japan has stated that the Japanese economy has moderately recovered, the weakness in some regions and the mild rise in service prices still raise concerns in the market. Especially against the backdrop of car manufacturers suspending shipments and rising prices, market concerns have further intensified. These factors may all have an impact on the exchange rate trend of the Japanese yen.

It is worth noting that the Bank of Japan did not disclose specific details and plans when it announced to reduce the size of treasury bond bond purchases. This ambiguity increases market uncertainty and volatility. Investors are unable to accurately assess the policy intentions and future adjustment directions of the Bank of Japan, making it difficult to make rational investment decisions. This uncertainty is detrimental to the stability and development of the market.

Market analysts generally hold a cautious attitude towards the decision of the Bank of Japan. They believe that the Japanese yen may continue to face depreciation pressure. On the one hand, as the purchase scale of treasury bond decreases, the market interest rate may gradually rise, which will be detrimental to the trend of the yen exchange rate. On the other hand, the uncertainty of the global economic situation and geopolitical risks may also have a negative impact on the Japanese yen.

However, we also need to see that the decision of the Bank of Japan is not without positive factors. By gradually reducing the purchase scale of treasury bond, the Bank of Japan is promoting the normalization process of monetary policy. This will help enhance the autonomy and sustainability of the Japanese economy, and reduce reliance on central bank intervention. Meanwhile, this will also provide more flexibility and space for future monetary policy adjustments.

In general, the decision of the Bank of Japan to keep the benchmark interest rate unchanged and forecast to reduce the purchase scale of treasury bond bonds has aroused widespread concern and concern in the market. This decision reflects the cautious attitude of the Bank of Japan towards the normalization of monetary policy, but also highlights the sensitivity and uncertainty of global financial markets towards policy adjustments. In this context, investors need to remain vigilant and rational, closely monitor market dynamics and policy changes, in order to make reasonable investment decisions.

At the same time, we should also recognize that adjusting monetary policy is a complex and lengthy process that requires comprehensive consideration of multiple factors and variables. In the process of promoting the normalization of monetary policy, the Bank of Japan needs to balance the relationship between multiple goals such as economic growth, price stability, and financial market stability in order to achieve sustained and healthy economic development. Therefore, we need to provide sufficient understanding and support to the Bank of Japan, while also maintaining a keen insight and ability to respond to market changes.