Sell Yen When Global Bond Yields Spike

Bank of Japan’s yield curve control policy warrants increased bond purchases each time there is upward pressure on the yields due to global factors. Yesterday’s sell-off in global bonds, pushed the 10-year Japanese yield to 0.11%. The BOJ immediately boosted its bond purchases and Yen dropped.

BOJ’s policy stance means JGB yields will almost always under perform their global peers.

The other question that comes to my mind is how long will BOJ enjoy this advantage? Sooner or later other central banks, most likely the ECB will retaliate.