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Japan faces its moment of truth on inflation

The Bank of Japan is fighting an increasingly lonely battle. So far, he has fended off speculators testing his resolve to keep interest rates low. But the market is betting that a plummeting yen and rising inflation will eventually force its capitulation.

Bet that the japanese central bank would follow its peers and raise rates this year fell flat despite the increasingly strong inflationary winds blowing. Japanese 10-year government bond futures fell 1.4% last week but rebounded this week after the Bank of Japan bought a record 9.24 trillion yen worth of bonds of state last week, according to the CEIC. The central bank reiterated its so-called yield curve control policy to cap 10-year bond yields at 0.25% at last week’s policy meeting.