The graph above is a potentially dangerous one. Until recently the fall of the yen was accompanied by a low, or even a falling Japanese bond yield. This was not so strange because Mr. Kuroda, the new Governor of the Bank of Japan, promised to buy even more Japanese Government Bonds to achieve its ultimate goal of 2.0% inflation. But, since the beginning of May, despite the promise of bond buying, the 10-year yield has gone up quite rapidly.
The danger is that the series of events, that should follow, will happen in the wrong order. Hence, that the (nominal) interest rate will start to rise significantly, way before inflation (now around -1.0%) starts to rise. This will keep the BoJ from lowering the real interest rate. Creating inflation with massive stimulus and a lower yen, while holding the long term interest rates down, will result in lower real yields. Low real yields are positive for economic growth and economic growth, in turn, could push up inflation further, helping the BoJ to reach its goal.
A sharp rise in nominal yields before inflation is picking up is exactly the other way round. Real yields will rise, hampering the economic recovery, making it increasingly difficult to reach the inflation target. So keep an eye on the relationship between the yen and the Japanese long term yield. The BoJ, meanwhile, has no real other option than to keep the yield low, at least until inflation really picks up.