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USD/JPY FUNDAMENTAL BACKDROP

USD/JPY continued its decline from the Asian into the European session following the Bank of Japan’s unplanned bond purchase operation, the second in a day. The Yen is looking to snap five days of losses against the greenback.

The Bank of Japan announced an unplanned bond buying operation for the second time in a day as it attempts to cap yields. The Central Bank has offered to purchase unlimited amounts of and 2- and 5-year notes as well as a daily offer to buy 10-year debt at 0.5%. The BoJ is facing a growing challenge as it plans to increase scheduled bond purchase in Q1 2023 by 23%. Markets have been hoping the BoJ would lift the cap on yields even further which has pushed the Central Bank into action with further tweaks expected by the Central Bank as 2023 begins.