In 2009, the Bank of Japan set its policy balance rate at 10 basis points. But since 2016, the rate has been kept at minus 10 basis points, and the central bank targets the yield on 10-year Japanese government bonds at zero per cent. This is done to encourage economic growth and stave off deflation, though it has been a long and difficult fight. We turn our attention to the yield on 20-year Japanese government bonds, which hovered at around 55 basis points last year. Trading down steadily this year, it is now testing the psychologically important 50-basis-point level with the lowest weekly close since late 2016. Breaking this will probably set off a move to even lower yields, at a faster pace, to retest the record low at zero per cent.
