It didn’t take much to reveal just how fearful global markets are about a change in Japan’s ultraloose monetary policy.
News the Bank of Japan was mulling a hawkish tweak to years of capping bond yields ignited a small-scale tempest across U.S. markets Thursday. Treasury yields spiked, the yen rallied, and U.S. stocks swung to a loss. Shaken markets continued to gyrate after the BOJ outlined the changes Friday.
Pain is spreading across a number asset classes as traders come to grips with the fact the last major central bank to resist restrictive policy appears to be caving in. Japanese markets are at the center of various international trades that exploit its rock-bottom interest rates, and bulls also worried about a repatriation of trillions of dollars of funds should those rates start to rise.