Recent interventions by Washington and Tokyo to avert a yen collapse highlight the dangers of monetary experimentation. Historical precedents from the 1930s, involving figures like Junnosuke Inoue and Korekiyo Takahashi, haunt Japan’s financial mandarins, driving a desperate desire for stability that may inadvertently create long-term dangers.

Japan faces a massive debt burden, with the BoJ's holdings of Japanese government bonds reaching a peak of 53.9 per cent in 2023. While the BoJ has begun 'normalising' policy by raising rates to 1 per cent, the yen has slid to ¥163 per dollar, its lowest in four decades.

This dilemma is compounded by rising debt-servicing costs, projected to reach a third of outlays in three years. While some economists suggest fiscal austerity or selling assets, Prime Minister Sanae Takaichi remains averse to higher rates, fearing the impact on economic reflation. As the BoJ navigates this trap, the fear of historical monetary failures continues to haunt current policy decisions.