Cracks have appeared in the Japanese yield curve control dam

The Bank of Japan is playing one of the most-dangerous games in central banking history.

The whole world is struggling with inflation and their currency is in the dumps, yet they continue to hammer the most-aggressive QE policy in history. The aim is to break a deflationary mindset but the problem is that they might succeed and find out that zeroed-out inflation is much preferable to high inflation.

Today's summary opinions from the most-recent Bank of Japan meeting shows that at least one BOJ member of the 9-person BOJ policy board argued for an urgent debate.

"A revision to the treatment of yield curve control should be discussed at an early stage," one member argued, noting that the cost of yield curve control was "high".

Other comments supported the current policy but displayed growing unease about high prices.

"Corporate behavior has seen clear changes, and price and wage hikes have been incorporated into corporate strategy," one comment said.

"There are both upside and downside risks to the outlook for consumer prices. As an upside risk, attention is warranted on the possibility that firms' pass-through of cost increases to consumer prices will continue for longer than expected," another said.

In last week's report, Japanese CPI ex fresh food and energy rose above 4%.

There's no direct talk of transitory but the BOJ's forecasts have inflation falling back down in time.

"Due attention is required because the possibility that the persistence of price rises in Japan has been underestimated cannot be ruled out, as were the cases with Europe and the United States," a comment said, highlighting the stakes.

And the stakes are particularly high for Japan because of its extreme debt load.

At this point, it's wholly irresponsible not to back away from total yield curve control or zero rates. Policy can remain stimuluative without resorting to such extreme measures.

The market, though, has been lulled into the same sense of complacency. There was some yen buying on the headlines yesterday but it has completely reversed since and yen crosses remain near multi-month (and sometimes multi-year) highs.The next Bank of Japan meeting isn't until July 28 but risk will be high and I'd expect yen strength for 3-4 days beforehand.

Moreover, don't sleep on the risk to global bond markets if the BOJ BOJ The Bank of Japan (BOJ) is the central bank of Japan. It was established in 1882 and is headquartered in Tokyo.The BOJ's main responsibilities include issuing and managing the country's currency, implementing monetary policy, and ensuring the stability of the financial system. It also acts as a lender of last resort to banks during times of financial crisis. The BOJ sets the interest rate of the country and sets an inflation target, aiming to achieve 2% inflation.The BoO has a long history, with The Bank of Japan (BOJ) is the central bank of Japan. It was established in 1882 and is headquartered in Tokyo.The BOJ's main responsibilities include issuing and managing the country's currency, implementing monetary policy, and ensuring the stability of the financial system. It also acts as a lender of last resort to banks during times of financial crisis. The BOJ sets the interest rate of the country and sets an inflation target, aiming to achieve 2% inflation.The BoO has a long history, with Read this Term pulls the plug. A shift in policy, or a return of real inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term would upend the entire global bond market.