- Kuroda’s NIRP Backlash – Japanese Interbank Lending Crashes
by Tyler Durden, www.zerohedge.com
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, Japanese banks(whether fearing counterparty risk or already over-burdened) have almost entirely stopped lending to one another. Confusion reigns everywhere in Japanese markets with short-term interest-rate swap spreads surging and bond market volatility spiking to 3 year highs (dragging gold with it). As Bloomberg reports,
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’ reserves at the monetary authority.