The Bank of Japan’s announcement of Yield Curve Control might look like an arcane piece of monetary policy from an economy that has struggled to escape from deflation. But for central bank watchers in Europe – all investors should be central bank watchers these days – it may provide a roadmap to the future.

First, the detail. Rather than go further into negative interest rate territory to stimulate its economy the Japanese central bank held firm to its -0.1pc deposit rate at a meeting last week. Instead, the BoJ focused on the yield on Japanese government debt, 10-year bonds to be precise, promising to buy as many as is necessary to keep yields at current levels of around 0pc.

The idea is to guard against “yield curve flattening”, which is what happens when there is little or no compensation for investors who buy longer-dated bonds, leading to a flatline on traders’ screens rather than the typical upward slope that denotes a healthy economy and also provides reasonable compensation for buying longer-dated instruments.

This flattening is an unwanted side effect of the central bank bond purchasing seen across major economies in recent years. Designed, like low or negative rates, to boost lending and corporate activity by reducing borrowing costs, when such purchasing flattens the yield curve, it has the opposite effect: banks tend to reduce lending as their compensation for doing so is reduced. This would not be an issue if banks were able to pass on the cost of negative short rates to consumers, but they are reluctant to do so for fear that depositors would take their money out of the system.