In the second scenario, a sudden jump in interest rates, short-term and medium-term bond funds take an immediate hit in their value and then take about two years or more to climb back to their starting value.

WSJ: A 401(k) Defense Against Rising Rates

By indicating that short-term rates will stay low until the end of 2014, the Fed is also having an effect on medium-term bond yields.

ECONOMIST: Buttonwood

In that case, there will be much talk of the Japan syndrome, and it is conceivable that medium-term bond yields will drop into the 1-2% range.

ECONOMIST: Watch out for currency confusion

The rise in medium- and long-term government-bond rates has already taken many by surprise and has led to howls of protest from politicians.

ECONOMIST: Japan's financial institutions