Why does Japanese bond market cause investors' concerns?

Global mortgage disorders have infiltrated Japan, a market angle that has not seen the fluctuations of decades, and it raises the concerns of investors who are already anxious due to the tensions in the US Treasury market. The Japanese Central Bank – the Bank of Japan – is seen as the ‘whale’ of the local bond market due to possession of more than half of the country’s sovereign effects, but it has gradually begun to reduce its public budget and reduce its effects. But the question is: Who is also interested in buying? On May 20, the sale of 20 -year -old bonds failed in more than a decade with a poor demand for the lowest level. Regarding the mortgage auction for 40 years on May 28, it was complied with the worst request within ten months. The collapse of the Japanese government bond market is being exacerbated by $ 7.8 trillion since US President Donald Trump unveiled his customs fees on the “Liberation Day” in April. 1) What makes government bonds attractive (usually)? Government bonds are generally considered one of the safest assets to invest in it because the possibility of the source – the government – is relatively low. This is due to the fact that the government sets its own rules and can usually raise money if needed. Long -term effects tend to deliver relatively high returns for a relatively low risk, as the investor agrees to determine the interest rate for a long period, such as 20 or 40 years. During this period, interest rates can fall, and so investors are rewarded for their risk. Japanese effects were one of the decades, one of the most stable government debt markets in the world. But the demand for IT was recently weak, which led to a decrease in the prices of bonds and the rise in returns in turn. 2) Why was the request weak? The Japanese central bank was long the largest owner of Japanese government bonds. Until recently, the country has been in a deflationary course since the 1990s, known as ‘lost contracts’. The purchase of bonds, which enables the government to issue more debt and increase the expenses, was part of the bank or Japan’s strategy to stimulate the economy. While Japan is leaving the shrinkage, it no longer focuses on strengthening the economy by buying bonds, and the central bank can focus on reducing its major belongings. In November 2023, Bank of Japan of debt reached a record level. So far, the bank has reduced its public budget by 21 trillion yen ($ 146 billion) and reduced its purchases by 400 billion yen every quarter of a year. Long -term effects with attractive returns by Japanese insurance companies and other institutional investors, but this time they didn’t block the void. Most of them await the fluctuations arising from the trade war that the Trump administration began in early April, and the uncertainty over the course of the bank or Japan interest rates. There was some demand from foreign investors, although their possessions were small compared to the great Japanese investors. In April, foreign funds bought a record Japanese record of 2.29 trillion yen with a maturity of over ten years. It came after standard purchases in February and March. This could be the result of a trading strategy, ‘Selling America’, which gained momentum in the market, while questioning the position of US Treasury effects as a safe haven. 3) What happens worldwide for effects? The highest sales wave has worsened in very large markets around the world since Trump unveiled his customs definitions on “Liberation Day” in April. The uncertainty about these fees, and whether it will require governments to increase spending in response, and the effects of this on their economies, are widespread. In the United States, the sale of bonds was expanded in May after the agency ‘Moody’ stripped the country of its last highest credit rating. However, the movements in Japanese ties with long -term are especially serious. 4) What are the risks? Poor demand for bonds, and thus the high income, can increase the cost of loans to the Japanese government, businesses and consumers. There are already existing concerns about the major debt burden on Japan. On May 19, Japanese Prime Minister Shikiro Ishiba said that Japan’s financial conditions are worse than Greece. This also puts the Bank of Japan in a difficult position, as the bank balance maintains a decline in borrowing costs and the need to raise interest rates to control inflation. For life insurance companies in the country, high -mortgage returns can mean great incomplete losses. Four of the largest Japanese life insurance companies have reported unrealized paper losses of approximately $ 60 billion in their possession of local bonds for the current financial year, which is almost four times a year ago. Deutsche Bank also warned that the high Japanese income bonds could make more attractive to local buyers, which could cause investors to withdraw their money from US debt. “While US bond markets and stock markets have benefited from the flow of money from Japan, this flow can now take the opposite path. Unusual step has sent the ministry a questionnaire to investigate the opinions of the market participants on the appropriate amounts to issue high -end effects, according to people who are familiar with the matter.