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  • Writer's pictureEdward Ballsdon

The BOJ’s debt "strait jacket”

Updated: 2 days ago


RESEARCH CONTENT

  • An ex-BOJ member has suggested that the BOJ could raise short end rates, but the hurdle to raise long end is high due to the risks to the financial system and fiscal environment.

  • The BOJ is the only major Central Bank undertaking QQE whilst others perform QT.

  • Japan went through the “lost generation” when the BOJ did not expand its balance sheet.

  • The BOJ’s QQE is limiting a crowding out effect (government finances are in a perilous state).

  • The report shows examples of the risks of not supporting the long end of the yield curve. However, the current QQE/YCC comes at the expense of a debasing currency.

  • The scenario analysis presented shows how rises in the yield curve impact debt interest costs and their impact on the government's budget.

  • The conclusions show that the BOJ can raise short end rates, bust discusses the consequences of altering its QE/YCC policy.

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