Now, as you can see, the 10-year in Japan has been back in negative yield territory all year — and sustainably, for the first time since 2016.
The last time rates were down here, the BOJ added some wrinkles in their QE plan. Instead of targeting a size of asset purchases, they began targeting a zero yield on the Japanese government bond. So, as long as the yield is positive in Japan, the Bank of Japan has the mandate to buy unlimited assets (print unlimited yen) to push the yield back to zero. They already own half of the JGB market. So, how can they influence yields higher from here? They can sell JGB’s. What might they do with those proceeds? Buy global stocks?
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