Will the Bank of Japan be able to stand firm?

The Bank of Japan is the only major central bank in OECD countries that wants to keep long-term interest rates close to zero. This is understandable given the large size of Japan’s public debt. But will the Bank of Japan be able to pursue this strategy? As long-term interest rates in Japan are becoming much lower than in other OECD countries, bond capital outflows will be significant; the Bank of Japan will therefore have to buy a huge amount of Japanese public debt to keep interest rates close to zero; there will therefore be strong monetary expansion in Japan; With both capital outflows from Japan due to low interest rates relative to other OECD countries and strong money creation while other central banks are stopping quantitative easing, the depreciation of the yen will be very pronounced. It will drive up inflation, leading to abnormally negative real interest rates. Money creation, exchange rate depreciation and capital outflows, imported inflation, abnormally negative real interest rates, bubbles, credit: it will be difficult for the Bank of Japan to stand firm, but it has no choice if it wants to avoid a public debt crisis.