boj

Japan just crossed a financial threshold that few seem to be paying attention to — yet it may be one of the most important turning points in its modern economic history.
The Bank of Japan is now facing ¥32.83 trillion in unrealized losses, the largest paper loss ever seen by a major central bank. For the first time since the global financial crisis, the BOJ’s interest expenses have overtaken its income, meaning the institution can no longer sustain itself under its current structure.

The strain is spilling directly into Japan’s bond market:
The 10-year JGB has surged to nearly 1.9%, a level untouched for almost 20 years.Long-term bonds are moving into new territory, with 30-year yields around 3.4% and 40-year yields above 3.7%.Japan’s bond market has now logged six consecutive years of negative returns — the worst performance among 44 major sovereign debt markets.
The stress isn’t isolated to the BOJ:
Japan’s four biggest insurers are sitting on roughly $67 billion in mark-to-market losses on domestic government bonds.Regional banks have around ¥3.3 trillion in unrealized losses.Analysts estimate banks need about ¥20 trillion in stronger assets to be considered stable — and most regional banks fall far short.
Layer onto this:
Public debt is nearly 230% of GDP, the highest level in the developed world.Inflation has stayed above the BOJ’s target for over 40 straight months.Markets now assign an 80% chance of another rate hike.And the BOJ controls more than half of all outstanding JGBs, making any meaningful unwinding almost impossible without introducing more volatility.
For decades, Japan’s near-zero rates were a key source of cheap global liquidity — the foundation of the carry trade. Now that system is cracking. When the carry trade unwinds, global markets usually feel the pain long before policymakers can respond.
This isn’t a local issue. It marks the slow reversal of one of the most extreme monetary experiments ever conducted — and the fallout could be enormous.

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