Are yield ceilings the future for monetary policy?

The Bank of Japan’s decision last week to begin targeting long-term bond yields marks a major shift in the conduct of monetary policy and is the latest sign that central banks are worried about the adverse side effects of very low long-term rates. In our view, it is unlikely to be copied by any other major central bank soon. But in future, ceilings on government bond yields could be part of a strategy of financial repression in order to bring down government debt ratios.