Rising Yields Making BOJ Efforts Harder

A Japanese government fiscal advisory panel warned that a failure to improve the nation’s finances could trigger a spike in bond yields that makes central bank easing less effective.

Prime Minister Shinzo Abe needs to map out a plan to curb the world’s largest public debt and maintain confidence in the nation’s bonds, the panel, which includes academics and company executives, said in a report released in Tokyo today.

“If the government fails to show concrete success in fiscal reform, the large bond purchases by the Bank of Japan over the next two years could be seen as debt monetization, and this may cause a sharp spike in yields, weakening the effect of monetary easing,” the report said.

Abe and Bank of Japan Governor Haruhiko Kuroda are grappling with reviving the economy without blowing out the nation’s debt burden, projected by the International Monetary Fund to reach 245 percent of gross domestic product this year, the highest in the world. Volatility in stocks and bonds is underscoring the challenge, with the Topix Index falling 3.4 percent today after a one-day 6.9 percent decline last week.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu