While inflation is still far lower in Japan than in most places, rapid increases in the prices of some everyday purchases have made it a political focus. A Nikkei poll following the Bank of Japan’s meeting at the end of last week found that nearly half of respondents thought that the BoJ should call a halt to ultra-loose policy. Another, more pressing challenge to Yield Curve Control (YCC) is coming from the bond market. The policy’s success in its first five years is indicated by the fact that the Bank was able to reduce its bond purchases substantially after YCC was introduced. But this month, as yields overseas have risen, the BoJ has been forced to buy more JGBs than ever before to keep yields within the target band. This pace of purchases cannot be sustained.
Asia Drop-In (30th June, 09:00 BST/16:00 SGT): Are Asia’s central banks behind the curve? Can the Bank of Japan and People’s Bank of China continue to go against the grain? Find out in our special session on what global monetary tightening looks like in Asia. Register now.
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