BOJ’s Tightrope: Tapering amid fiscal pressure and bond market strain

Discussions around aggressive fiscal spending and a sharp increase in super-long bond yields are adding complexity to the Bank of Japan’s quantitative tightening (QT) strategy. The recent surge in the 40-year Japanese government bond (JGB) yield to a record 3.445% has sparked concerns over the BOJ’s ability to scale back bond purchases without unsettling the markets.