Japan reminds world why it’s stuck in QE quicksand

TOKYO – The Bank of Japan bowed to financial realpolitik Tuesday (October 31) by allowing bond yields to top 1%. But Governor Kazuo Ueda remains tethered to a level of policy unreality sure to keep the yen under strong downward pressure.

Ueda’s step was the tiniest the BOJ could have gotten away with without shoulder-checking global markets. It means far less than currency traders may think in terms of when and how Japan might exit a 23-year-old quantitative easing (QE) experiment.

The BOJ meeting “ended up somewhat confusingly but largely dovish leaving the yen still vulnerable to a further sell-off versus the dollar,” says Gary Dugan, chief investment officer at Dalma Capital.