For academics and policymakers gathered at the U.S. Federal Reserve's annual Jackson Hole economic conference to debate how central banks can affect market perceptions on the course of monetary policy, the Bank of Japan might appear to have gotten it right in July when it raised rates for a second time.
In March the BOJ managed at last to end eight years of negative interest rates. The next month it began dropping hints it would kick off steady interest rate hikes if inflation remained on track to meet its forecasts.
The message went ignored by markets, until last month. That's when the BOJ backed hawkish signaling with action: It lifted short-term rates to 0.25% from 0-0.1% in a surprise move that triggered a global unwinding of carry trades that for the better part of a decade had been funded with ultracheap Japanese yen.
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