With subzero rates Japan appears to be spinning toward a significant economic disruption either sooner or later. The Land of the Rising Sun appears to be digging a very deep hole for itself.
Japan is still the world’s 3rd largest economy after the USA and China so upheaval in Japan means global upheaval.
(From Yahoo Finance)
The $9 trillion market for Japanese government bonds had been all but paralyzed since the BOJ began a massive monetary easing three years ago that made the bank the dominant buyer.
But in the two months since the BOJ announced it was imposing a negative interest rate, JGBs have become a volatile commodity, with prices swinging wildly as below-zero yields confound investors’ attempts to find fair market value.
“The JGB market is really in a bubble, when you think about it as an investment vehicle,” said Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo. “Their prices have moved away from fundamentals, and people don’t have a traditional way to measure their value.”