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BOJ’s Dilemma Spurs Speculation on Reverse ‘Operation Twist’

Views Of The Bank Of Japan Head Office From The Recently Renovated Courtyard
Photographer: Akio Kon/Bloomberg
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Japan’s central bank, long a pioneer in pushing the envelope of monetary policy in its campaign to stimulate the economy, may yet add to its record of innovation.

The Bank of Japan’s current dilemma is that while its peers have eased policy -- or are set to do so soon -- it has refrained from additional action. That leaves Japan’s exchange rate vulnerable if other central banks’ moves drive down their currencies. A stronger yen would hurt Japanese exporter earnings and the stock market, and put downward pressure on prices.