TOKYO -- The Bank of Japan's attempts to deter short-selling of Japanese government bonds are producing both intended and unintended effects, forcing speculators to close out their positions while potentially further eroding market functions.
Short sellers who bet on a change in monetary policy are making the BOJ's yield curve control difficult by adding upward pressure on yields. Ironically, they are placing their bets by using the BOJ's bond-lending facility designed to provide liquidity to the market.
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