Cracks appearing in Yield Curve Control

It hasn’t failed yet but the Bank of Japan’s need to return repeatedly this week to defend the ceiling of its yield target suggests that cracks are appearing in the structure of Yield Curve Control. If maintaining it requires large-scale purchases, the Bank may have to give up. While this would only have a modest impact on private sector borrowing costs, it would call into question the sustainability of large-scale fiscal expansions in response to economic shocks.