TOKYO - On Wednesday (January 18), the Bank of Japan did what officials in Tokyo do best: take the economic path of least resistance. The betting that Governor Haruhiko Kuroda would shock markets with bold “tapering” moves became increasingly intense since the BOJ made a minor tweak to bond yield policies. On December 20, it moved to let 10-year yields drift as high as 0.5%. That convinced hedge funds that the BOJ is ending its 24-year zero rate strategy. Hardly. On Wednesday, Kuroda left the yield curve control (YCC) program unchanged, sending the yen sharply lower. The BOJ left its negative interest rate at -0.1% and 10-year bond yields around 0%. And in doing so, Kuroda effectively told economists and traders to pay better attention next time.
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