Defending the Tokyo Yield Curve – WSJ


In this age of monetary policy experimentation, it’s always worth checking out Frankenstein’s central banking laboratory: Japan. In recent days, Tokyo has taken steps to defend one of its most adventurous policy moves, for reasons and with potential consequences worth watching.

The problem is yield curve control, under which the central bank sets an explicit anchor for one or more interest rates and then trades bonds as needed to defend the anchor. The Bank of Japan was a pioneer of modernity when it dusted off this mid-20th century relic in 2016, capping interest on 10-year government bonds at 0.25%.


Wj

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