From the business pages of a leading Japanese publication is the question where would the Japanese 10 year yield be located if QE Yield Control wasn’t implemented. The current Japanese 10 year trades 0.047 while the Theoretical value based on publication formula is 0.14. In 8 months of Yield Control implementation at USD 731 billion per month, the BOJ bought themselves about a full point. This equates to a total at 8 months at 5848.00 Billion USD. The BOJ now owns 40% of the JGB market.
The other interesting aspect to 0.14 if memory serves yet written in these pages, Taylor Rules places interest rates at 0.1. The 0.1 level is located above the 10 year, below the 15 year but most important above Japanese Call Rates. The Japanese yield to hit the negative target may require an interest cut to save the Japanese as Call Rates literally moved from 0.941 January to 0.952 today.
At Japanese budget time in April, the Call Rate traded 0.963. JPY/USD trades 0.008802, JPY/EUR 0.007960 and it is these exchange rate where the Japanese mastered offshore rates as Euroyen trades far above all short term interest rates. Repatriations and interest profits for Japanese banks always occurred in Japanese afternoons.
Most vital levels for today’s USD/JPY are located at 112.93 and 113.13 Vs above at 113.75 and 114.20. The overall range is located from 111.00’s to 115, specifically clustered at 115.12 and 115.14. USD/JPY won’t easily walk through both range points. Below 113.12, next comes 113.05 and the bottom cluster at 112.93 and 112.91.