“BoJ doesn't create waves. But when we stop keeping the water flat, the world will see ripples.”

— Kazuo Ueda – March 2024

When Tokyo's Whale Starts to Turn

If there's any creature that has shaped the stability of the financial world over the past decade, it's... Tokyo's whale – the Bank of Japan (BoJ).

For nearly 30 years, BoJ has held the Japanese Government Bond (JGB) market like a silent patron: keeping yields almost flat, buying every issuance, maintaining an interest rate universe where every shock is neutralized in silence. JGB is the sleeping pill of the G10 system – smooth, slow, but precise like a pendulum clock.

But then, in March 2024, that clock had its battery removed.

BoJ abolishes the Yield Curve Control (YCC) policy, cautiously begins “baby taper”, and suddenly... everything starts moving. JGB yields swell, bond auctions fail, the Yen fluctuates wildly, and pension funds – once peacefully hidden – now have to worry about revaluing their entire balance sheets.

From a “flat rock,” JGB has turned into a global lever – where every slight turn by BoJ creates a chain reaction from Tokyo to Washington, from Frankfurt to Toronto.

And international investors, who once ignored JGB, are now stunned, staring at every move of BoJ – as if it were the first domino in a financial order about to collapse.

In today's article, Viet Hustler will dive deep with you into the following aspects:

• JGB – the “ruler” of global finance: Why did Japanese bonds once serve as the pricing foundation for every investment model from New York to Frankfurt?

• BoJ & Historical Turning Point: From abolishing YCC to “baby-taper”, the Bank of Japan is triggering a pricing domino chain with... damaging lag.

• Global Market Reaction: Shock yield spikes, failed auctions, capital outflows – and unpredictable hiccups from Tokyo to Wall Street.

• VaR, Leverage and Carry-Trade Exposed: When the “vol = 0” foundation collapses, global leveraged strategies face forced repricing effects.

• BoJ Caught Between Politics and Markets: No intervention means the system cracks, intervention accused of manipulation – Governor Ueda faces a chess game with no good moves.

• Post-BoJ Investment Strategies: From domestic steepener to FX put-spread – how investors reposition when the world's “anchor” no longer stands still.

And the final – but vital – question: Is the disruption of the G7's “calmest” market the first crack in a financial ecosystem rotting from within?