USDJPY is highly correlated with the spread between 10-year interest rates in Japan and the US, and if the BoJ abandons YCC, then we could see a significant appreciation of the yen as Japanese investors move money back from the US and Europe to higher-yielding fixed income in Japan. With inflation in Japan sticky above the 2% inflation target, there is a significant risk that the BoJ could exit YCC within the next six months.
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