Bond markets pick up wrong signal from Japan

NEW YORK: This week, the Bank of Japan (BoJ) bought a less-than-expected amount of long-dated Japanese government bonds (JGBs): It announced it would buy 190 billion yen (US$1.7bil) worth rather than an expected 200 billion yen at a scheduled auction. That was enough to rattle the market, as investors conjectured the BoJ had begun tapering its bond purchases by stealth, thereby effectively tightening monetary policy. Government bond yields have ticked up globally in recent days, largely as a result.

But markets have short memories. The reality is that this sort of variation in bond-buying is exactly what BoJ governor Haruhiko Kuroda said it would do in September 2016, when announcing its reformed monetary policy.