The Bank of Japan v the markets

Thirty years ago, Britain’s snap decision to withdraw from the European Exchange Rate Mechanism made George Soros, a hedge-fund titan, more than $1bn from his short positions against sterling. Hedge funds may not be the financial giants they were in 1992, but some speculators still aspire to “break the bank”, to borrow the phrase used to describe Mr Soros’s bet. This time, it is not the Bank of England but the Bank of Japan that the would-be bank-breakers have their eyes on.

The boj stands out like a sore thumb in the world of monetary policy. While the Federal Reserve, the European Central Bank and the Bank of England are rushing to combat inflation by reversing asset-purchase schemes and raising interest rates, the boj is sticking to its guns. After a meeting on June 17th it left its policy of “yield-curve control”, intended to keep yields on ten-year Japanese government bonds at around 0%, firmly in place. As the gulf between Japanese and rising American bond yields has widened, the yen has plunged: by 15% this year so far, to its lowest level against the dollar since the late 1990s.