Monitoring Commodity Markets: From the Perspective of Understanding Global Financial Market Trends

The Foreign Exchange Operations Section of the Financial Markets Department of the Bank of Japan monitors the foreign exchange market and other global financial markets. In recent years, the relatively sharp price movements observed on global financial markets have generally been accompanied by risk-cutting activities by global investors, and, it has become increasingly important to monitor trends on markets, such as the commodity markets, that have reacted sensitively to changes in investors' risk appetite in these situations. The price formation on the commodity markets has changed in recent years as market participants have become diversified and the scale of trading has expanded. By utilizing the expertise that we have accumulated in monitoring major currency markets, we are working to establish a framework of global monitoring for the commodity markets, in cooperation with other central banks. We also aim to improve our monitoring techniques of commodity markets, through exchanges of views with market participants active in Japan.