At points yesterday the market acted like everything was falling apart and every negative outcome was possible.
As part of that, the yen rallied significantly. Given that it came with falling US yields, there was some thought that it was a reversion to the classic flight-to-safety trade.
The Bank of Japan put an end to all of that today. They left policy unchanged, including the pledge to unlimited bond buying to keep JGB yields capped at 0.25%. That policy is unsustainable so it's certainly not the final chapter in the story but ended the latest round of frenzied speculation.
With that, USD/JPY has completed the round trip, climbing 250 pips today and back where it was on Wednesday.
It's also a reminder of how the FX market is so tough to understand and anayze in real time.
It's easy to look back now and say it was BOJ angst. At the time, many things were happening and the BOJ was just one of them.
Looking ahead, this move from the BOJ will help to calm the entire market's nerves.
