Specifically, yield curve control entails setting the short-term policy interest rate at  4  minus 0.1 percent, while conducting purchases of Japanese government bonds (JGBs) and other operations for the long-term interest rate to ensure that 10-year JGB yields remain at around 0 percent.
The Bank's monetary easing assumes a transmission mechanism that works in three ways (Chart 12): (1) nominal interest rates are pushed down through yield curve control; (2) inflation expectations are raised by working on people's expectations through the inflation-overshooting commitment, leading to a decline in real interest rates (i.e., nominal interest rates less inflation expectations); and (3) lower real interest rates encourage economic activity and improve the output gap, which in turn pushes up actual inflation.