The Bank of Japan’s ultra-loose monetary policy is under pressure from a swathe of global central banks embarking on a series of rate hikes and balance sheet reduction programs. While many central banks, including the Federal Reserve (Fed) and the Bank of England (BoE), are trying to navigate a tricky course of suppressing rampant inflation while leaving their economies with enough liquidity to grow, the BoJ has a different set of problems, namely anemic growth and consistently below-target inflation. As interest rate differentials widen between Japan and other major economies, the Japanese Yen continues to weaken. And the Bank of Japan is not just standing by and letting this happen, it looks to be actively encouraging the move.
