This is a dramatic fail (like funny skateboard fail video stuff)
It may or may not be a big fail (like great depression market crash stuff)
In an unprecedented occurrence, Japanese bond futures have halted.
Trading has stopped. There are no buyers.
That is dramatic. It is a high-profile FAIL but it happens so rarely (NEVER) that we really don’t know if this leads to a dramatic economic crash,
or just a one-day “weird thing.”
Basically, the Bank of Japan has been doing the opposite of the recent Fed and the ECB actions. The BoJ has continued to try to keep rates low, but suddenly this morning, literally zero buyers showed up to buy Japanese bond futures.
(facepalm)
Below is an article on the sudden halt.
It reads in part (bold mine)
(Bloomberg) – The Bank of Japan’s unexpected hawkish shift is sending shock waves through global markets that may just be getting started as the developed world’s last holdout for rock-bottom interest rates inches toward policy normalization. . .
“This was bound to happen with inflation rising in Japan, it’s just happened sooner than many thought,” said Amir Anvarzadeh, an analyst at Asymmetric Advisors in Singapore . . .
Japan’s benchmark 10-year yield jumped as much as 21 basis points to 0.46% before dropping back to 0.4% after the BOJ also announced unscheduled debt-purchase operations. Trading of Japanese bond futures was briefly halted by the Osaka Exchange after they hit a circuit breaker threshold.
Ummm
The Japanese bond thing means that the Bank of Japan may now be forced into raising interest rates. It has kept the benchmark rate at or below zero for along time.
The problem is, everyone in Japan has a 35 year mortgage with a 0.5-1% interest rate that is not fixed. Real estate there might crash.
I try (and sometime fail) to remember more bad news stories does NOT equal “it’s gonna be worse.”
Sometimes my instincts fail me and, I think seeing 20 bad news stories means “deeper recession,higher unemployment etc.” than if I see only10.
Things are getting worse in Japan
Ten days ago the Bank of Japan unexpectedly raised its ceiling for the benchmark 10-year note to 0.5%. But investors hate the word “unexpectedly.” A 0.5% interest rate is a stupidly low rate. It is purely artificial. It is purely the stuff of Keynesian interventionism and the Bank of Japan is 100% correct to abandon it and raise rates.
But, since the Bank of Japan is now doing unexpected things,
(suddenly) few people want to buy Japanese bonds.
When people don’t want to buy bonds that drives the interest rate on those bonds up,
The BoJ’s intention was to intervene less.
The BoJ’s intention was to print less
but, it backfired the BoJ is now printing even more money to buy those bonds to keep the rate down to only 0.5%.
If you or I are in some kind of credit tailspin, e.g. using credit cards to pay car loans, then getting a payday loan to pay the credit cards, then lenders would not lend us money unless we pay a higher rate.
Well, lenders won’t lend money to Japan (buy Japanese bonds) unless Japan pays a higher rate, so the BoJ is printing up money to buy bonds instead.
天皇陛下万歳 (“Tennōheika Banzai” “Long live the Emperor”)
