The BOJ announced today that they will buy bonds with the target of keeping the 10 year yield at 0%. The BOJ commits to traders that they will be buyers. This sounds like a bold bullish move. The only problem is that there have been no sellers. The BOJ has already cornered the market. In essence based on not being able to buy as many bonds as they would have liked, their announcement is not as strong as the market reaction implies. That tells us the market "wanted to go up" anyway.
Yield Control: The BOJ Bond Buying Backstop
It's a nice move. It means that if bond investors want to sell the BOJ will be their buyers. The BOJ calls it yield control.
The plan works as long as there is inflation. If there is no inflation there is not much change to the BOJ's plan. Why? Because…