THE BOJ IS ABOUT TO OWN HALF OF THE JGB MARKET...

The Bank of Japan (BoJ) will most likely be the first major centralbank to own more than 50% of its own bond maket (the BoJ currently owns 49.2% of the JGB market). The boe comes next with nearly 39% of Gilts.

The BoJ could pass the 50% threshold as early as this week. That would be crossing the Rubicon. The private sector in Japan is already very overweight JGBs and underweight equities. Inflation has recently surged to a 10-year high, and further falls in the yen promise to pressure inflation yet higher. Ownership-concentration risks mean that any sign that inflation is getting out of control would likely prompt an exodus from JGBs into to more inflation-resilient equities.

Owning half the JGB market is a potential tipping point that could eventually find the BoJ the sole bag-holder of the world’s third-largest bond market.

Source: Bloomberg, zerohedge