The Bank of Japan has taken a small step toward relinquishing its longstanding attachment to ultraloose money.
But don't expect the central bank to proceed briskly along the path of anything resembling normal interest rates. Such a move is way off, if it ever happens. Unlike many of its peers, the BOJ still wants to kindle inflation. On Friday, it acknowledged some progress — and stepped on its message.
That is the key to understanding the half-hearted nature of what transpired. In allowing long-term rates to rise somewhat beyond its comfort zone, the BOJ surprised a majority of economists, who predicted that the previous ceiling on 10-year bond yields of 0.5% would be retained. However, Gov. Kazuo Ueda refrained from specifically lifting the limit to 0.75%, as a minority had predicted, or abandoning it entirely.