TOKYO : The Bank of Japan's yield curve control (YCC) is under fierce market attack, as investors test the bank's commitment to capping bond yields with inflation above the BOJ's target.The BOJ's ultra-easy policy targets some short-term interest rates at -0.1 per cent and the 10-year government bond yiel
TOKYO : The Bank of Japan's yield curve control is under fierce market attack, as investors test the bank's commitment to capping bond yields with inflation above the BOJ's target.
To pull long-term rates back up, the BOJ adopted YCC eight months later by adding a 0 per cent target for 10-year bond yields to its -0.1 per cent short-term rate target. The bank has tapered bond buying in times of market calm to lay the groundwork for an eventual end to ultra-easy policy.As stubbornly low inflation forced the BOJ to maintain YCC longer than expected, bond yields began to hug a tight range and trading volume dwindled.
Investors broke the 0.5 per cent cap on Friday, spurring expectations the BOJ would have to take more drastic steps.YCC worked well when inflation was low and prospects for hitting the BOJ's price target were slim, as investors could sit on a pile of government debt that ensured safe returns.
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