Japan’s Yield Curve Should Give Investors Pause (EWJ)

From Tyler Durden: While a day doesn’t go by when the US Treasury yield curve’s plunge is not discussed (and its flattening again today).

As its recessionary-signaling prowess from the past is questioned by those that know better than it’s different this time – there is another yield curve in the world that has collapsed with far less media attention…


The decline in Japan’s yield curve is a sign investors have given up on the Bank of Japan readying for a normalization of its unprecedented monetary policy, according to Mitsubishi UFJ Kokusai Asset Management.

This curve collapse is happening even as The BoJ is ‘stealth tapering’ its bond-purchases…

Expectations that the Bank of Japan wants a steeper yield curve to pave the way for tighter policy are all but gone, given the paltry rise in inflation, said general manager of trading Akio Kato in an interview in Tokyo.

Despite the fact that Japan has suffered (officially) five recessions in the last 30 years, the JGB 2s10s yield curve has not been inverted since 1991…

And perhaps more concerning, now that investors are losing faith in The BoJ’s normalization, Kokusai’s Kato warns that, there’s “nothing to put a brake” on further flattening.

The iShares MSCI Japan ETF (EWJ) was unchanged in premarket trading Wednesday. Year-to-date, EWJ has declined -3.60%, versus a 4.93% rise in the benchmark S&P 500 index during the same period.

EWJ currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 77 ETFs in the Asia Pacific Equities Ex-China ETFs category.

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