Questions for my friends in Japan on Yield Curve Control
Wednesday 23 September 2026 at 17:55
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Edited by Alfred Anate Bodurin Mayaki, Wednesday 23 September 2026 at 18:00
Why and how did Japan set out on the 8-year path of Yield Curve control (YCC) when it did in September 2016 until March 2024 (Shiratsuka, 2025)?
How has yield curve control (YCC) itself influenced Japan’s current labour market situation in 2026?
What conventional monetary policy strategies can be enacted by the BoJ to counter the current economic situation?
What lessons emerge for other central banks about controlling the yield curve implicitly through interest rates?
JAPAN’S APPROACH TO DEBT SUSTAINABILITY AND EXCHANGE RATE COMPETITIVENESS IN THE ERA OF YCC
Much has been said in recent times about Japan’s Yield Curve Control policy. The tenure of Abenomics brought with it many issues of monetarism and governance in Japan, including the challenge of an aging population, economic stagnation and an increasing labor force participation rate. This section aims to address the following sub-questions:
How YCC contributed to the country’s erroneous debt-to-GDP position?
How YCC made the Yen weaker, triggering an intervention in the UST market?
How are Japan responding to rising energy prices amid the crises in the Strait of Hormuz?
BANK OF JAPAN (BOJ) AND MACROPRUDENTIAL POLICES IN THE ERA OF YCC
This section aims to address the following sub-questions:
Did the BOJ’s YCC policy leave a number of large Japanese investment banks such as Nomura, Mizuho, and MUFG artificially exposed to market conditions?
How were Japanese financial institutions left exposed?
By ‘pinning’ the 10-year bond yield (JGB) at 0% for an 8-year period, the BoJ and MoF forced its domestic institutions to “search for yield” abroad by “pushing massive amounts of capital” into domestic markets.
Institutional investors in Japan unable to meet their obligations to retirees with 0% yields on JGB’s in Japan and were thus forced to “search for yield” by converting Yen to Dollars (or Euros) and buying higher yielding foreign debt: such as USTs, European sovereign debt or Australian bonds.
REFERENCES
Masanao, T. (2024) ‘Bank of Japan’s Policy Shift Ushers in a New Era for Investors’, PIMCO – Economics and Markets Commentary
Nakamura, E. and Steinsson, J. (2013). ‘High frequency identification of monetary non-neutrality’, National Bureau of Economic Research.
Obstfeld, M. and Rogoff, K. (2002) ‘Global Implications of Self-Oriented National Monetary Rules’, The Quarterly Journal of Economics, 117(2), 503-535
Shiratsuka, S. (2025). ‘What did the Bank of Japan do under the yield curve control policy?’, Journal of the Japanese and International Economies, 76, p.101352.
Questions for my friends in Japan on Yield Curve Control
Why and how did Japan set out on the 8-year path of Yield Curve control (YCC) when it did in September 2016 until March 2024 (Shiratsuka, 2025)?
How has yield curve control (YCC) itself influenced Japan’s current labour market situation in 2026?
What conventional monetary policy strategies can be enacted by the BoJ to counter the current economic situation?
What lessons emerge for other central banks about controlling the yield curve implicitly through interest rates?
JAPAN’S APPROACH TO DEBT SUSTAINABILITY AND EXCHANGE RATE COMPETITIVENESS IN THE ERA OF YCC
Much has been said in recent times about Japan’s Yield Curve Control policy. The tenure of Abenomics brought with it many issues of monetarism and governance in Japan, including the challenge of an aging population, economic stagnation and an increasing labor force participation rate. This section aims to address the following sub-questions:
How YCC contributed to the country’s erroneous debt-to-GDP position?
How YCC made the Yen weaker, triggering an intervention in the UST market?
How are Japan responding to rising energy prices amid the crises in the Strait of Hormuz?
BANK OF JAPAN (BOJ) AND MACROPRUDENTIAL POLICES IN THE ERA OF YCC
This section aims to address the following sub-questions:
Did the BOJ’s YCC policy leave a number of large Japanese investment banks such as Nomura, Mizuho, and MUFG artificially exposed to market conditions?
How were Japanese financial institutions left exposed?
By ‘pinning’ the 10-year bond yield (JGB) at 0% for an 8-year period, the BoJ and MoF forced its domestic institutions to “search for yield” abroad by “pushing massive amounts of capital” into domestic markets.
Institutional investors in Japan unable to meet their obligations to retirees with 0% yields on JGB’s in Japan and were thus forced to “search for yield” by converting Yen to Dollars (or Euros) and buying higher yielding foreign debt: such as USTs, European sovereign debt or Australian bonds.
REFERENCES
Masanao, T. (2024) ‘Bank of Japan’s Policy Shift Ushers in a New Era for Investors’, PIMCO – Economics and Markets Commentary
Nakamura, E. and Steinsson, J. (2013). ‘High frequency identification of monetary non-neutrality’, National Bureau of Economic Research.
Obstfeld, M. and Rogoff, K. (2002) ‘Global Implications of Self-Oriented National Monetary Rules’, The Quarterly Journal of Economics, 117(2), 503-535
Shiratsuka, S. (2025). ‘What did the Bank of Japan do under the yield curve control policy?’, Journal of the Japanese and International Economies, 76, p.101352.