Low JGB yields not a sign of policy failure

The persistently low level of Japanese government bond (JGB) yields is not necessarily a sign that“Abenomics” is failing. Indeed, a premature surge in borrowing costs could put the whole project atrisk, given the mountain of public debt. Instead, low yields reflect the success of the Bank of Japan insignalling that monetary policy will remain loose. We expect this message to be underlined by theannouncement of further asset purchases in 2015 – something that the consensus no longer anticipates.