In addition, the widening gap between interest rates in Japan and elsewhere pushed the value of the yen lower, further straining the country’s heavily import-dependent economy. That led some analysts to speculate that the Bank of Japan would soon be forced to raise rates.
Which brings us to December, when Mr. Kuroda suddenly announced that the bank would double the ceiling on 10-year bond yields, allowing them to fluctuate between plus and minus 0.5 percent, effectively raising interest rates.
For many investors, the decision seemed like the first tentative step toward even bigger rate hikes. As bond yields have risen, the bank has had to spend a lot of money to defend its interest rate target.
That begs the question: how long can the Bank of Japan hold on?
The answer depends on a number of factors, including the performance of the global economy and whether the central bank believes it has finally reached its targets for wage growth and inflation, said Toshitaka Sekine, an economics professor at Hitotsubashi University.
Most experts believe that the process of winding down Mr. Kuroda’s monetary easing policy, when the time comes, will take years. It’s certainly complicated: many Japanese borrowers have become accustomed to cheap money — floating interest rates, for example, are common — and a hasty withdrawal could put pressure on both households and businesses.
It could also be painful for global markets, which have come to take Japan’s accommodative monetary policy for granted. Years of anemic growth and a decade of super-low interest rates have led many Japanese investors to seek higher yields abroad, further increasing their already prominent role in global credit markets.
While unlikely, a quick turnaround by the Bank of Japan could “send some hard-to-foresee shockwaves around the world,” said Brad Setser, a fellow at the Council on Foreign Relations and an expert on global trade. and capital flows. “At worst, rapid increases in Japanese long-term interest rates drive up long-term interest rates globally.”