In the case of Japan, the upward pressure on long-term interest rates remains limited so far, since the BOJ’s massive purchases of JGBs have helped to generate stronger downward pressure on the interest rates with reduced risk premiums. Chart 6 shows the decomposition of key factors contributing to long-term JGB yields.
There is no single explanation for asset price inflation and, as New Zealand itself discovered in the mid-nineties, with quite a strong increase in the price of both residential and rural property, it is often extraordinarily difficult to restrain asset price inflation even when inflation in consumer prices is low.