BOJ Ramps Up Yield Control Defense Against Global Debt Rout
Comment of the Day

June 14 2022

Commentary by Eoin Treacy

BOJ Ramps Up Yield Control Defense Against Global Debt Rout

This article from Bloomberg may be of interest to subscribers. Here is a section:

The jacked-up moves reflect the BOJ’s commitment to protect its yield-curve control policy even if it prompts further slides in the yen as the Federal Reserve accelerates its rate hike pace. Worse-than-expected inflation data from the US has been a catalyst behind the global market rout this week.

Governor Haruhiko Kuroda insists it’s too early for Japan to step back from keeping rates ultra low, with the economy still recovering from the pandemic and inflation stemming largely from higher energy prices. The vast majority of surveyed economists expect the bank to stick with its policy settings this week.

Still, as the pressure continues to build on the BOJ’s easing framework, speculation smolders on that changes will have to come eventually.

“There’s growing market concern over possible adjustments in yield curve control given the yen is weakening so rapidly,” said Hiroshi Miyazaki, senior economist at Mizuho Research & Technologies.

“The BOJ is likely to be able to keep yields low for 10-year yields, but it remains to be seen whether it can control longer maturities.”


Eoin Treacy's view

Japan has been trying to ignite inflationary forces for years. Arguably, it was impossible to succeed in that objective because the world was in a secular disinflationary trend. Now that inflationary pressures are ramping higher at the fastest pace in decades, Japan is not about to miss the opportunity to change the population’s psychology.

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