PIMCO Starts Buying Yen... "BOJ Expected to Raise Interest Rates"

BOJ Monetary Tightening Anticipation Spurs Yen Buying

Global largest bond manager PIMCO is actively buying Japanese yen in preparation for future tightening policies by Japanese monetary authorities.

According to Bloomberg on the 19th (local time), PIMCO began building yen buying positions when the yen's value fell to the 140 yen per dollar level.

Emmanuel Charef, a PIMCO fund manager, recently said in an interview with Bloomberg, "As Japan's inflation continues to rise and consistently exceeds the target, Japan will want to move toward abandoning or modifying its Yield Curve Control (YCC) policy," adding, "Ultimately, interest rate hikes may be necessary." He added, "U.S. inflation is declining, while Japan's inflation continues to rise. Therefore, we are naturally buying yen."

The yen-dollar exchange rate rose to around 151 yen last week but is currently moving around 149 yen. It has fallen nearly 16% since the beginning of the year. The U.S. rapidly raised its benchmark interest rate over the past year and a half, but Japan maintained its negative interest rate policy, widening the interest rate gap between the U.S. and Japan. If the yen falls further to around 152 yen per dollar, it would mark the lowest level in 33 years since 1990.

The market expects the Bank of Japan (BOJ), Japan's central bank, to soon abandon its negative interest rate policy. Former Fed Vice Chair Richard Clarida predicted that if Japan's inflation rises stronger than expected, the BOJ will revise its YCC policy within this year. Japan's consumer prices in September rose 2.8% compared to a year ago. Although the increase fell below 3% for the first time in 13 months, it was higher than the forecast (2.7%). Clarida expects the BOJ to raise the short-term benchmark interest rate from the current -0.1% to 0% early next year.

One of PIMCO's reasons for buying yen is the expectation that if the yen-dollar exchange rate breaks through the 150 yen level, intervention by Japanese foreign exchange authorities will occur, making further yen depreciation unlikely.

Manager Charef said, "I think Japanese authorities feel considerable pressure around the 150 yen level in the yen-dollar exchange rate," adding, "When the rate touched the 150 yen level last time, Japanese authorities were effectively forced to intervene. This time, they are likely concerned about the same situation."

This content was produced with the assistance of AI translation services.