{"id":18387,"date":"2016-02-28T19:08:10","date_gmt":"2016-02-29T00:08:10","guid":{"rendered":"http:\/\/olduvai.ca\/?p=18387"},"modified":"2016-02-28T19:08:10","modified_gmt":"2016-02-29T00:08:10","slug":"kurodas-nirp-backlash-japanese-interbank-lending-crashes","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=18387","title":{"rendered":"Kuroda’s NIRP Backlash – Japanese Interbank Lending Crashes"},"content":{"rendered":"

Kuroda’s NIRP Backlash – Japanese Interbank Lending Crashes<\/a><\/h3>\n
<\/div>\n
\n
\n

Not only has the Yen strengthened and stocks collapsed since BoJ’s Kuroda descended into NIRP lunacy but, in a dramatic shift that threatens the entire transmission mechanism of negative-rate stimulus,\u00a0Japanese banks<\/strong>\u00a0(whether fearing counterparty risk or already over-burdened)<\/em>\u00a0have almost entirely stopped lending to one another<\/strong>. Confusion reigns everywhere in Japanese markets with short-term interest-rate swap spreads surging and\u00a0bond market volatility spiking to 3 year highs (dragging gold with it)<\/strong>.<\/p>\n

As Bloomberg reports,<\/p>\n

\n
The outstanding balance of the interbank activity plunged 79 percent to a record low of 4.51 trillion yen ($40 billion) on Feb. 25 since Bank of Japan Governor Haruhiko Kuroda on Jan. 29 announced plans to charge interest on some lenders\u2019 reserves at the monetary authority.<\/div>\n

\"\"<\/a><\/p>\n

While Kuroda wants to lower the starting point of the yield curve to reduce borrowing costs and spur shift of funds into riskier assets,\u00a0the interbank rate has fallen only about as far as minus 0.01 percent, above the minus 0.1 percent charged on some BOJ reserves.\u00a0<\/strong>The swings on bond yields will make it harder for financial institutions to determine how much business risks they can take, weighing on lending in a weak economy even as they are penalized for keeping some of their money at the central bank.<\/p>\n

It will take at least another month until the market finds a level where many dealings are settled,<\/strong>\u00a0as financial institutions face uncertainty over how the new policy affects monthly fund flows, said Izuru Kato, the president of Totan Research Co. in Tokyo.<\/p>\n

\u201cSince past patterns don\u2019t apply under the entirely new structure, financial institutions will take a conservative approach until the financing picture is nailed down,\u201d Kato said.\u00a0\u201cIf the funding estimate proves wrong, banks might lose by prematurely lending in negative rates. People are cautious and staying on the sidelines.\u201d<\/strong><\/p><\/blockquote>\n

…click on the above link to read the rest of the article…<\/p>\n

 <\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Kuroda’s NIRP Backlash – Japanese Interbank Lending Crashes Not only has the Yen strengthened and stocks collapsed since BoJ’s Kuroda descended into NIRP lunacy but, in a dramatic shift that threatens the entire transmission mechanism of negative-rate stimulus,\u00a0Japanese banks\u00a0(whether fearing counterparty risk or already over-burdened)\u00a0have almost entirely stopped lending to one another. Confusion reigns everywhere […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[57,1838,1719,12709,8386,124,12710,452,1225,1421,534,7477,558,1389,2773,1478,10388,4318],"class_list":["post-18387","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-of-japan","tag-barclays","tag-bond","tag-bond-volatility","tag-borrowing-costs","tag-central-banks","tag-fund-flows","tag-japan","tag-kuroda","tag-libor","tag-monetary-policy","tag-morgan-stanley","tag-negative-interest-rates","tag-nirp","tag-volatility","tag-yen","tag-yield-curve","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18387","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=18387"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18387\/revisions"}],"predecessor-version":[{"id":18388,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18387\/revisions\/18388"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=18387"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=18387"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=18387"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}