Speculators are descending on Tokyo again. Not the currency kind, but activist bond traders testing how tolerant the Bank of Japan is about rising yields. Gov. Haruhiko Kuroda's answer: not very.
That's the upshot of Thursday's surprise move to buy "unlimited" Japanese government bonds at a fixed rate, a move aimed at regaining the momentum from Donald Trump's shock election win. Kuroda threw down the gauntlet, saying "interest rates may have risen in the U.S., but that doesn't mean that we have to automatically allow Japanese interest rates to increase in tandem."
If you're thinking "good luck with that, Kuroda-san," you're in good company. Count Japanese banks among those hoping he will fail to drive 10-year rates lower (sub-zero yields hurt bank profitability). But bond speculators, too, may be wise to bet against Kuroda's ability to maintain the negative rate policy he's toyed with since February.