A rise in long-term nominal government bond yields in a major overseas economy may exert upward pressure on the government bond yields in Japan. The upward force may work against the downward pressure maintained by QQE, potentially weakening the effectiveness of monetary policy and leading to greater volatility in long-term nominal and real interest rates.
In the last three years, however, productivity growth has accelerated, reaching an astonishing 4 percent growth in the last two quarters. The growth in productivity has enabled business to pay higher wages without raising prices significantly or eroding profits severely.