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Japanese Bond Market Implodes On Takaichi Power Play
There's trouble in bond land and the epicenter's Tokyo.
Three months into her tenure, Japanese Prim
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My sense is this gamble of hers will pay off. Her popularity amongst the Tokyo folks that I am most close to is undeniable and broad-based. A lot of her ideas aren’t new per se, but she is a good communicator and is capitalizing effectively on her outsider status as a woman in a male environment. It is probably this aspect of her premiership that draws appropriate comparisons with Mrs T given Japan is several decades behind the UK in its drift toward gender equality.
Yeah, I don’t see this going poorly for her politically, it’s a just a matter of whether the BoJ ends up having to step in and cap yields. The JGB market’s not the most well-functioning beast in the world thanks to the BoJ’s huge footprint and that’s the addiction liability they’re running: They broke it, and now they own (~50% of) it, which means buying more of it in the event it short circuits.
Yes – for many years Japan was a living breathing example of MMT in practice. Weaning away from that may be tough.
The JGB market sure has changed. Back in the mid-80s there were very few foreign players active in the JGB markets. Really just two of us from the US. This morning, I glanced over a stat that 65% of trading in the “free” supply of JGBs is now being done by foreigners. I’d wager by foreign specs. Since domestic players are more in the buy & hold category, their activity has a magnified impact on the prices.
It reminds me of the oil market. Most crude is locked up in long-term contracts, leaving a smaller pool of oil free form encumbrances. I recall that the size of that pool was below 90% yet when we talk about prices movements in the oil market that’s what we are talking about.
Oopsie – the size of that pool was below 90% NOT! Try below 10%