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The US ETFs 1 month 3 month Year to date
ProShares Ultra Yen ETF (YCL) -6.15% -8.04% -9.43%
ProShares UltraShort Yen 6.14% 7.88% 9.79%

Save USD/JPY vs. Nikkei 225 Index

Yen movement and Nikkei 225 index have a clear positive correlation since 2002 (In this chart, Yen's upward movement suggests depreciation), because:

1. Exports and corporate profit benefit from depreciation of Yen, pushing stock prices up.
2. Interest rate is extremely low in Japan, so the financing costs of Yen are low, too, and traders like to borrow Yen to invest. Whenever the market is panicking due to economic tensions, Nikkei 225 index slides, and demand for Yen increases, because traders have to buy Yen to pay back their loans. Funds returning to Japan brings up Yen, and Nikkei 225 drops.

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Latest Stats
  • Nikkei 225 Index (L)
    2021-03-08
    28,885.50
  • US/JPY (R)
    2021-03-08
    108.39
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Save Official Reserve Assets

Ministry of Finance (MOF) releases Japan's official reserve assets every month. According to IMF, the monetary authority controls the country's reserve assets "for meeting balance of payments financing needs, for intervention in exchange markets to affect the currency exchange rate, and for other related purposes". Reserve assets include foreign reserves (including foreign currency securities and deposits), IMF reserve tranche positions (RTP), SDRs, gold and others.

95% of Japan's official reserve assets are foreign reserves, of which American bonds is the majority. Japan and China hold the most American bonds.

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Latest Stats
  • Japanese Official Reserve Assets (L)
    2020-12
    1,394,680.00m
Source
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Save Government Bond Yield and Spread

Short-term bond yield is normally controlled by the central bank, while long-term bond yield reflects the market's projection of inflation. Spread between the two represents the slope of yield curve.

After Financial Crisis, BOJ deepened its bond-purchasing operation, pushing bond yield curve down and flat. Since January 2016, BOJ announced its negative interest rate policy, which led to slumps in both short- and long-term bond yield. In September 2016, BOJ introduced a new policy framework called "Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control (YYC)", which kept the short-term yield around -0.1%, and fixed 10-year bond yield at around 0% to protect the finance and insurance sectors from ultra-low interest rate.

BOJ currently holds 40% of Japanese government bonds.

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Latest Stats
  • Japan 10-year Government Bond Yield (L)
    2021-03-08
    0.10%
  • Japan 2-year Government Bond Yield (L)
    2021-03-08
    -0.13%
  • Japan 10-year and 2-year Bond Yield Spread (R)
    2021-03-05
    0.22%
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Save Japanese Monetary Base

BOJ releases Japanese monetary base every month, which is the sum of currencies supplied by BOJ in circulation and the balance in current accounts deposited at BOJ.

After Abe took office, BOJ practiced qualitative and quantitative easing (QQE) in April 2013. The QQE program shifted the operation target from uncollateralized overnight call rate to monetary base. By purchasing a great amount of Japanese government bonds, ETFs, and J-REITs, BOJ increased currency supply and devalued Yen to stimulate economic growth.

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Latest Stats
  • Japan Monetary Base (L)
    2021-02
    6,106,078.0000m
  • Japan Monetary Base (YoY,R)
    2021-02
    6,106,078.0000m
Source
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Save Japan Basic Discount Rate and Basic Loan Rate

Official discount rates were renamed as basic discount rate and basic loan rate in 2001. Financial institutions can borrow money from the central bank at basic discount rate, which is one of BOJ's monetary policy tools. When the Bank raises basic discount rate, short-term bond yield will rise.

Since Japan signed Plaza Accord in 1985, Yen rose significantly. Japanaese government lower discount rates by 250 bps within two years. Funds flooded into the stock market and the housing market, creating a huge asset price bubble. Later, the bubble burst when, in 1989, BOJ raised interest rates sharply by 600 bps within a year. The 90s is therefore referred to as "The Lost Decade" in Japan.

BOJ continued to lower discount rates little by little, implemented quantitative easing in 2001, which ended in 2006. During the Financial Crisis in 2008, discount rate went through ups and downs. It is currently at 0.3%.

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Latest Stats
  • Japan Basic Discount Rate and Basic Loan Rate
    2021-03-04
    0.30%
Source
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Save Japan Benchmark Interest Rate

After the financial crisis in 2008, BOJ aimed to stimulate the economy by taking many critical measures, including cutting rates down to 0%, implementing quantitative easing, controlling uncollateralized overnight call rate, and enlarging its asset-purchasing program.

Since Abe took office in 2013, BOJ announced a new round of quantitative and qualitative easing, which includes controlling basic currency, buying more assets such as government bonds, Nikkei ETFs, and J-REITs, and extending due date of government bonds. The bank planned by doing so to fuel inflation, lower real interest rates and boost exports.

But since early 2016, Abenomics has become less effective. BOJ announced sub-zero interest rate policy, which divides financial institution's current account balance deposited at the Bank into three layers at three interest rates: positive, zero and negative interest rates.

In September 2016, BOJ once again shifted its operation target from basic currency to bond yield curve. The Bank maintains 10-year bond yield at 0% to secure financial institutions' profit prospect.

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Latest Stats
  • Japan Benchmark Interest Rate
    2021-01
    -0.10%
  • Japan 10-year Bond Yield
    2021-03-08
    0.10%
Source
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Save 3-month Libor

LIBOR is an average interest rate between banks in London, determined by the market. It has 7 dues and 5 denominations. It indicates the level of liquidity among major financial institutes.

When LIBOR rises, liquidity is "tightening"; when LIBOR lowers, liquidity is "easing."

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Latest Stats
  • USD 3-month LIBOR
    2021-03-05
    0.19%
  • EUR 3-month LIBOR
    2021-03-05
    -0.55%
  • GBP 3-month LIBOR
    2021-03-05
    0.08
  • JPY 3-month LIBOR
    2021-03-05
    -0.09
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Related Product
The US ETFs 1 month 3 month Year to date
ProShares Ultra Yen ETF (YCL) -6.15% -8.04% -9.43%
ProShares UltraShort Yen (YCS) 6.14% 7.88% 9.79%

Save US/JP 10-year Bond Yield Spread vs. USD/Yen

Yen is one of the operation targets in carry trading and a safe-haven currency. Carry trading means borrowing low-interest currency and trading against high-interest currency. Spread between the pair will be the gains. Also, when risks are high, investors buy in Yen.

After the asset bubble burst in the 90s, interest rates were low. Yen thus became the main target in carry trading. But after the internet bubble collapsed in 2000, Yen began to rise because investors bought back Yen as spread between the US and Japan had narrowed down. After the Financial Crisis in 2008, as spread was closing and demand for hedging was high, Yen was on a 6-year streak of rising until Abe took office in 2013. Abe's three arrows led to Yen's sharp depreciation.

Since 2015, whenever tensions build up in the market, Yen is one of the top choices for hedging. For example, when Fed raised interest rates in 2015 and when Chinese economic growth slowed down during 2016, Yen spiked. But when Donald Trump got elected as American president in 2017, American bond yield surged and brought Yen down.

In conclusion, Yen's movement largely depends on US/JP spread and BOJ's monetry policy.

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Latest Stats
  • USD/Yen (L)
    2021-03-08
    108.39
  • 10-year Yield Spread Between Japan and US
    2021-03-08
    1.48%
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Save Financial Position

After Abe took office, BOJ practiced qualitative and quantitative easing (QQE) in April 2013. The QQE program shifted the operation target from uncollateralized overnight call rate to monetary base. By purchasing a great amount of Japanese government bonds, ETFs, and J-REITs, BOJ increased currency supply and devalued Yen to stimulate economic growth.

BOJ continued to deepen its QE program in late 2014; announced sub-zero interest rates in early 2016; enlarged its asset-purchasing program once again in July 2016; controlled bond yield curve in September 2016.

BOJ's financial position shows that the Bank has been shrinking its balance sheet since 2017, because:
1. The Bank believes without economic stimulus program the economy will still be robust.
2. The Bank needs funds to secure the market when risks rise.

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Latest Stats
  • BOJ's Financial Position (L)
    2021-02
    7,126,021.1200m
  • Yearly Growth BOJ's Balance Sheet (R)
    2021-02
    7,126,021.1200m
Source
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Save Japan BOJ Holdings of ETFs

Buying stocks ETFs is part of the Abeconomics. BOJ has bumped up purchase of ETFs for 4 times. Since the pandemic hit, BOJ has been buying ETFs at an annal pace of ¥12 trillion, and the percentage of BOJ's assets in the total market capitalization of all Tokyo stocks exchange-listed companies has been increasing.

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Latest Stats
  • Japan BOJ Holdings of ETFs
    2021 W08
    35,705,788,732.00k
  • Proportion of BoJ's Stock Hold
    2021-01
    5.12%
Source
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