You are here

Japan becomes prisoner of weak yen in prison of its own making

The longer the present situation continues, the greater the risk of serious distortions in the economy

The Bank of Japan pursues an ostensible inflation target whereby it controls yields and interest rates. By keeping these near zero under its "yield curve control" policy that is supposed to spur inflation, the central bank is able to exert indirect downward pressure on the yen.


THERE is no such thing as a free lunch, it is said, and likewise there is no such thing as a "free ride". There is always a price to be paid. Yet, Japan has been "free-riding" on the back of a weak yen for some time and the price or fare that will have to be paid eventually could be...