Japanese Yield Curve Collapses, Investors Give Up Hopes Of BoJ Normalization

While a day doesn't go by when the US Treasury yield curve's plunge is not discussed (and its flattening again today)...

As its recessionary-signaling prowess from the past is questioned by those that know better than it's different this time - there is another yield curve in the world that has collapsed with far less media attention...

Japan.

The decline in Japan’s yield curve is a sign investors have given up on the Bank of Japan readying for a normalization of its unprecedented monetary policy, according to Mitsubishi UFJ Kokusai Asset Management.

This curve collapse is happening even as The BoJ is 'stealth tapering' its bond-purchases...

Expectations that the Bank of Japan wants a steeper yield curve to pave the way for tighter policy are all but gone, given the paltry rise in inflation, said general manager of trading Akio Kato in an interview in Tokyo.

Despite the fact that Japan has suffered (officially) five recessions in the last 30 years, the JGB 2s10s yield curve has not been inverted since 1991...

And perhaps more concerning, now that investors are losing faith in The BoJ's normalization, Kokusai's Kato warns that, there's “nothing to put a brake” on further flattening.

Comments

HilteryTrumpkin Free This Wed, 07/11/2018 - 09:48 Permalink

Oh it is this fucking retard that thinks I should have to pay for his Fire and police protection with my tax dollars which we all do. Yet I never need any fire or Police as I am fully capable of protection myself in both cases. This free shit army fuck has the nerve to tell me this isn't socialism when it defines Socialism. Fire and Police are 99% Socialized get over it Tea Party Retard!

In reply to by Free This

philipat MuffDiver69 Tue, 07/10/2018 - 23:46 Permalink

As a matter of interest, what happens when the BOJ owns the entire JGB "market". Reminiscent of Bernanke telling Congress that "We are not monetizing the debt because our Balance Sheet is only temporary". Of course, this very much depends on the definition of "temporary" although these neo-Keynsian PhD's should also be familiar with Keynes remark that "in the longer term we are all dead"?

In reply to by MuffDiver69

mosfet philipat Wed, 07/11/2018 - 00:15 Permalink

They'll start looking to buy up other 'assets' with printed Yen until BoJ gets the inflation it so desperately desires...and will receive in abundance after the tipping point is reached.

Then begins the free-for-all for how fast the Japanese can get their wealth out of Japan via crypto, foreign stocks and real estate.  One guess as to which 1 of those 3 is not currently in a bubble?

In reply to by philipat

107cicero philipat Wed, 07/11/2018 - 08:06 Permalink

You are correct in calling todays crop of main stream economists, 'neo-Keynesian', as Lord Keynes ideas were markedly different.

Lord Keynes wanted governments to spend, go into deficits in recessions and depressions.  However, he  also decreed that when the economy was good governments should run small surpluses to 'save up' for the inevitable 'rainy day'.

Today these sad  excuses as 'economic scientists' (an oxymoron if there ever was one) have perverted his theory.

In reply to by philipat

Yen Cross Tue, 07/10/2018 - 23:38 Permalink

   When shit gets serious, it's very important to keep a cool head. [elevator music]

  Little "rocket boy" giving kudos?

   Welcome to Ripley's neighbor thinks you believe her/his crapola.

SH_Resurrected Tue, 07/10/2018 - 23:38 Permalink

The same thing's happening here, with the 2&10 spread.

The big-dough dudes and dudettes think/know that Jerome's tightening is gonna be restricted, so the twos are climbing to meet the tens, while the tens are descending to meet the twos.

Balance-Sheet Wed, 07/11/2018 - 00:56 Permalink

The median age in Japan is almost 48 years old and rising. Under circumstances like this the CB has to create masses of new cash every year to keep the economy completing transactions.

Super old people aren't going to borrow vast amounts to create needed currency creation so the BOJ has to.

Mr. Kuroda cannot simply kick Mr. Abe out his office so he has to say he will conform to Mr. Powell's path and simply conduct his long term plans.

Mr. Powell *might* eventually realize that the financial 'truths' of the early 1950s are certainly not valid in 2019/2020 if they were ever valid 65 years ago.

Yen Cross Wed, 07/11/2018 - 01:32 Permalink

  I'm pretty sure, that the $usd is going to end the year [2018]stronger, for all the wrong reasons.

  Derivatives have completely destroyed equity markets. Borrowing costs need to be 500 basis points higher.

   Financial pancakes coming soon.

Let it Go Wed, 07/11/2018 - 07:26 Permalink

For years many economist have looked at Japans economic path and predicted an economic crisis brought on by the growing debt of its government. The reality is that much like the situation that developed in Greece it is clear that Japan is facing a wall of debt that it will never be able to repay.

The myth promoted by the central banks that a major currency cannot fail is accepted as fact by many people however, the rapid demise of either the yen or the euro is all that will be needed to reveal the truth and remind people everywhere that our system of fiat money is held together only by faith in the system and a prayer. Below is an article making the case the yen is destined to fail.

 http://The Yen And Its Failure To Fail.html

Cthonic Wed, 07/11/2018 - 09:45 Permalink

"Despite the fact that Japan has suffered (officially) five recessions in the last 30 years, the JGB 2s10s yield curve has not been inverted since 1991"

 

Japan has had no real growth in nearly three decades.  Only growth is in the numéraire; such is the fate of every debt-based economy with an unanchored elastic currency.

Read the original federal reserve act and one will note that there existed hard limits on how many federal reserve notes were allowed in circulation.  No such limit now exists or is enforced; in fact without a public audit the reported numbers should only be considered a lower bound.