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Is the Bank of Japan Holstering Its Bazooka?

The Bank of Japan's unexpected decision to raise its ceiling on government-bond yields could be the first step toward a long-awaited monetary-policy normalization, despite official statements to the contrary. After all, there is good reason to think that inflation will remain slightly above target in 2023.

TOKYO – On December 20, the Bank of Japan decided to raise its ceiling on ten-year government bond yields from 0.25% to 0.5%. Within minutes of the announcement, the yen appreciated against the US dollar by 3%, the Nikkei 225 fell by 2.5%, and the ten-year bond rate jumped almost 25 basis points to approach the new ceiling.