Japan’s extraordinarily expensive defence of its monetary policy

In december thebojbojbojbojboj’ () gave speculators an opening. By lifting its cap on ten-year government bond yields from 0.25% to 0.5%, the central bank raised the prospect that it would abandon its “yield-curve-control” policy entirely. Since then, officials have been put to the test by increasingly unco-operative bond markets. The has been forced to make enormous bond purchases in an attempt to drive down the yield, buying ¥9.5trn ($72bn) on January 12th and 13th alone.Speculators excitedly awaited the ’s next meeting. Would it be the moment the central bank gave up the fight? On January 18th the announced it would in fact keep going. The bank even promised to buy more bonds if necessary. The yen slumped on the news; short-sellers licked their wounds. Yet defending the policy is becoming astonishingly costly. The s difficult decisionsare not going away.