Yen does not have many fans at the moment – Commerzbank

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Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, analyzes JPY outlook as markets assess what the BoJ actually means with its cryptic guidance.

Does the BoJ know how to rip off a plaster? 

After the fierce market reactions to the recent change in YCC, it was surely clear to even the last Japanese monetary policymaker that a further increase in the yield ceiling would have led to fierce market reactions once again. That is the price to be paid by a central bank that abandons a monetary policy position in which it has been entrenched for ages.

But in my opinion, it is extremely short-sighted to avoid this market reaction by creating monetary policy ambiguity. Because in the end, monetary policy only works if it is understood. 

To me, the BoJ seems like a child who needs to pull off a plaster and doesn’t dare to get it done in one pull. Instead, it plucks it off piece by piece, which is ultimately much more unpleasant. No one should be surprised that the Yen does not have many fans at the moment.