The Bank of Japan had to step in yet again to defend its 10-year yield target this week, but it didn’t have to go to the same lengths as in late-March to keep yields in check. With yields nailed to the floor, the yen continued to slide rapidly against the dollar, but we doubt that the Finance Ministry’s jawboning will be followed up by actual intervention. Meanwhile, Japan’s population fell at the fastest pace on record last year. Unfortunately, a shrinking population is now being compounded by falling productivity. The upshot is that the long-term prospects for Japan’s economy are increasingly grim.
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