The Bank of Japan has decided to take a historic pivot starting today that marks an end to yield control and purchasing of risk assets including ETFs (Exchange Traded Funds) and REITs (Real Estate Investment Trusts). This austere and unprecedented move tells the financial world two things, that most developed countries are over-leveraged and that inflation is becoming unsustainable for the working class. The class that literally drives world trade.

Up until now, yield control in Japan included negative interest rates in their rate easing measures. As low as 0.1% below zero. They have also imposed the negative rate on some commercial bank money parked at the BOJ since 2016 in a bid to spur industrial growth and to avoid deflation. This unorthodox measure to periodically kickstart the Japanese economy has only been employed by a handful of other central banks.

Central banks in Denmark, Sweden, Switzerland and the eurozone broke monetary policy taboos by pushing rates below zero in an effort to ignite economic growth after the 2008 financial crisis. (Sweden ended negative rates in 2019, and the other European central banks followed in 2022.)

Yield control differs somewhat from the U.S. Federal Reserve’s quantitative easing and tightening. Although both can have unwanted results depending on magnitude and length of easing or tightening measures. The Fed steers the economy by lowering or raising very short-term interest rates, such as the rate that banks earn on their overnight deposits. Under yield curve control (YCC), a central bank targets some longer-term rates and pledges to buy or sell enough long-term bonds to keep the rate from rising above or below its target. So instead of simply quantitative, it is also qualitative.

You might ask yourself why investors would buy negative yield bonds. Gains are still possible based on the relative fluctuation of the yield as well as in buying government bonds for foreign exchange advantage, which could totally negate the negative yield entirely depending on the relative exchange rate gains. Regardless of government bonds being safe haven investments across the board, in the case of negative yields, more than $18 Tn of debt trading at a negative yield at the peak in 2020 were based on negative central bank policy rates, so this is another example of excessive monetary policy that has, at times, helped worsen global markets.

As inflation and economic growth have returned, central banks have raised their policy rates far more aggressively than Japan’s. Hardly any debt now has a negative yield.

Japan’s proposal will raise the current short-term policy rate target of minus 0.1% to between zero and 0.1%. BOJ Gov. Kazuo Ueda and other policy board members will make a decision based partly on Monday’s discussions of economic and price data. With the BOJ’s goal of sustainable 2% inflation in sight, the bank is moving to guide interest rates higher for the first time in 17 years.