Bank of Japan Gov. Kazuo Ueda has received a timely reminder of the pitfalls he faces in trying to tiptoe toward policy normalization without disrupting markets.
The yen unexpectedly weakened after the central bank loosened its grip on bond yields Tuesday, as the BOJ’s move appeared to fall short of investors’ hopes for a clearer sign of progress toward policy tightening.
Still, even if Tuesday’s step was partly a stumble, it brought Japan closer to a more conventional policy approach after decades of experimentation with quantitative easing, negative interest rates and yield curve control (YCC).