Japanese Inflation – Liquidity Crisis in the Making (Part 2)

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I ended Liquidity Crisis in the Marking- Japan's Role in Financial Stability- Part 1 with the following quote from BOJ Governor Haruhiko Kuroda:

The BoJ should persistently continue with the current aggressive money easing toward achieving the price stability target of 2% in a stable manner.

While many central bankers are anxiously waging war against inflation, the Bank of Japan (BOJ) is egging it on. Over the last few weeks, the BOJ has offered to buy as many 10-year notes at 0.25% as the market will offer it. In central bank parlance, I call that “unlimited QE.” While the BOJ caps bond yields with "aggressive" QE, it is doing so at the expense of the yen.

The carry trade

In Part 1, I discussed how Japanese citizens and pension plans invested abroad to earn higher yields. They were not the only ones taking advantage of the difference in interest rates between Japan and many other countries.