Countries would be wise to heed the lessons learned by Canada in the 1990s: the bond market is there until it is not. Implications of low for long for the financial sector The conviction that interest rates will be low for long can lead to various types of risky behaviour in the financial sector.
The Bank’s purchases of JGBs within the framework of the Program are monetary policy measures that have been judged necessary to overcome deflation, and are not conducted with the aim of financing the fiscal deficit. At the same time, Japan’s enormous fiscal deficit and government debt outstanding are significant concerns that could elevate fiscal risk.