What is the Bank of Japan?
Bank of Japan (BoJ)
Forex Trading Glossary
Quick Answer: The Bank of Japan is Japan's central bank, known for ultra-loose policy, yield-curve control, and occasional currency intervention.
What is the Bank of Japan?
The Bank of Japan (BoJ) is Japan’s central bank, famous for ultra-loose policy, yield-curve control, and occasional currency intervention. BoJ decisions significantly impact JPY crosses like USD/JPY and EUR/JPY.
Signature Policies
- Yield-curve control: Caps 10-year Japanese government bond yields through active purchases.
- Negative rates: The policy rate has sat at or below zero for years to combat deflation.
- Balance-sheet expansion: The BoJ buys JGBs, ETFs, and corporate paper to add liquidity.
- Currency vigilance: Officials monitor rapid yen moves and may intervene to curb volatility.
Beware Intervention
Sharp JPY weakness can trigger direct FX intervention by Japan’s Ministry of Finance. Always manage risk when shorting the yen during rapid rallies.
Trading Around the BoJ
- Track meeting dates: Policy statements and press conferences often spark large moves.
- Monitor inflation: Rising core CPI increases speculation that yield-curve control may shift.
- Watch global yields: The spread between U.S. Treasuries and JGBs drives carry trades in USD/JPY.
- Stay nimble: Use options or disciplined stops when positioning ahead of BoJ surprises.
Related Terms
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