Bank of Japan and government policy divergence intensifies: High market pressure to expand bond purchases, Ueda insists on monetary normalization BlockBeats reported that on August 10, the yield of Japanese treasury bond continued to rise, intensifying the game between the Japanese government and the Bank of Japan around the direction of monetary policy. The market is concerned whether the Bank of Japan can continue to promote policy normalization under the pressure of fiscal expansion. On Monday, the yield of Japanese 10-year treasury bond rose to 2.805%. Some analysts believe that if the 3% threshold is exceeded, a new round of bond selling may be triggered. The increase in yield this time is mainly influenced by the expansionary fiscal policy of Japanese Prime Minister Hayao Takashi. As one of the developed economies with the highest debt levels in the world, the rising financing costs of the Japanese government have raised market concerns, and the United States is also putting pressure on Japan's fiscal and monetary policies. According to reports, Takashi Hayao has long supported loose policies similar to "Abenomics" and urged the central bank to expand bond purchases if necessary to curb long-term interest rate hikes during a meeting with Bank of Japan Governor Kazuo Ueda in May this year. At the same time, staff members of the Takashi government have expressed concerns about the Bank of Japan's plan to reduce its balance sheet, believing that the pace of the reduction may be too fast. Toshihiro Nagahama, a member of the Japanese government expert group, stated that the Kaohsiung City government is more inclined to stabilize the economy through quantitative policies rather than relying on traditional tools such as interest rate hikes. But the Bank of Japan is trying to maintain the credibility of normalizing monetary policy. The central bank believes that the main factor driving up the yield of Japanese treasury bond is inflation pressure, rather than the decline in the scale of bond purchases. The Bank of Japan has previously ended its yield curve control policy and will reduce bond purchases as an important step towards exiting its ultra loose policy. Bank of Japan officials warn that if the market believes that the central bank's bond purchases are aimed at reducing government financing costs or achieving debt monetization, it may damage the central bank's independence and anti inflation credibility. [Original link]