Japan’s Policy Trap | Long End is Plumbing

The Yen Is the Symptom. The Long End Is the Plumbing.

Japan’s problem is not simply a weak yen.

It is that the currency and the sovereign yield curve are beginning to describe the same policy constraint.

The government benefits from low borrowing costs.
Households need relief from imported inflation.
The Bank of Japan needs enough independence and credibility to prevent inflation expectations from drifting hig…