Japan may be just posing as an outlier.
Yes, the Bank of Japan renewed its commitment to ultra-low interest rates just as other developed economies were moving toward further rate increases and an end to stimulus. But beneath the headlines about the BOJ's pledge to keep printing money for an "extended period," Gov. Haruhiko Kuroda and his colleagues left clues to what higher rates might look like in Japan. They aren't ready to walk through that door, but the keys are on the table.
Under the changes unveiled last week, the yield on the benchmark 10-year Japanese government bond will be allowed to move as much as 0.2 percent above or below the target of zero. Doesn't sound like much, but investors behaved like it was a significant change. The BOJ jumped into the market to calm things after yields surged to an 18-month high. That was a surprise, given the yield touched 0.145 percent, well within the new parameters. If traders believed the "extended period" dovish narrative, the intervention to suppress yields wouldn't be needed. Deputy Gov. Masayoshi Amamiya told reporters on Aug. 2 that rapid moves won't be tolerated.