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Dysfunction plagues Japan bond market as BOJ sticks to its guns

Central bank's unprecedented easing faces its limits

Bank of Japan Gov. Haruhiko Kuroda framed the central bank's expanded lending program as a tool to help correct the yield curve. (Pool photo)

TOKYO -- The Bank of Japan's yield curve control policy has wreaked havoc over the country's bond market, from drying up the supply of 10-year government bonds to interfering with the issuance of corporate debt.

The central bank is now looking to smooth out the yield curve by spurring more organic demand for government bonds, using a new approach unveiled after its latest policy meeting. But the side effects of its ultraloose policy continue to mount, raising questions about how long it can keep going down its current path.

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