Reality bites

29 Mar 2022 By Pete Sweeney Follow @petesweeneypro

War, Covid-19 and an aggressive-looking Fed are conspiring against Governor Kuroda’s ultra-loose policy. The yen is plunging and government bond yields are up despite BOJ efforts. There’s no easy solution, but doing nothing is risky too.

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The yield on the benchmark 10-year Japanese government bond hit a six-year high of 0.250% on March 28, reaching the upper limit of the Bank of Japan's policy band even after the central bank stepped into the market to try and rein in its rise.

As a result, in an unprecedented intervention, the Bank of Japan offered to purchase an unlimited amount of the notes for four consecutive days after the yield touched 0.245% for the first time since January 2016.

The U.S. central bank may need to raise interest rates more aggressively to tackle high inflation, New York Federal Reserve President John Williams said on March 25. Several U.S. central bank officials, including Fed Chair Jerome Powell, indicated earlier this week a renewed sense of urgency in battling a surge in prices that has pushed inflation to a 40-year high.

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