The reason why all this matters to global markets is that Japanese investors have spent more than $3 trillion offshore in search of higher yields. Japanese investors sold a record amount of overseas debt last year as local yields rose on speculation that the BoJ would normalise policy. He has the unenviable task of anchoring global investor perceptions of where Japan’s policy is headed, while maintaining domestic monetary stability. In July, for example, the central bank loosened the YCC again without the disruption in financial markets that took place in December, when Ueda’s predecessor was still in charge. The question is whether the policy exit can be conducted in an orderly manner, given that a disorderly one could have dramatic consequences for financial markets and the global economy.

Source: Wall Street Journal January 18, 2024 23:10 UTC