Sep
27

Yukky Yield

bank-of-japanThe Bank of Japan’s decision to target a 0% yield on 10-year Japanese government bonds should reassure the government that it can run bigger deficits without triggering a jump in debt service costs, thereby promoting increased spending. But with a peg, the BOJ must buy as many 10-year bonds as necessary to keep the rate at 0%, giving up control over the quantity of its purchases. Slightly risky but manageable.

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