Major indices down 4+% was a stupid knee-jerk reaction. It means literally nothing to corporates. This is not a move from 25bp to 50bp on its way to a 4% 10y JGB.

TOPIX ended the day -1.5% which is more like it. Largely unch'd in USD terms.

Banks and Insurers had A Very Good Day.

TOPIX Bank Index +5.1% on the day. Insurers +4.5%, major listed life insurers (8750, 8795) +9% on the day.

Sharp gain in PBR, but from a VERY low starting point. And higher rates steeper curve means better ROE.

$/yen low 133s? Why not.

Take a look at the move in 1998 post intervention to see how bad things can get.

A move like THAT would be a reason to see TOPIX fall 4%.

Or 10%.

I note that the BOJ targets "ex-fresh food CPI" which was negative in Feb this year on a y-o-y basis and ppl expect in the high 3s (3.9%?) when it reports on Thurs. Some measures (household spending, property prices, etc) are all doing a bit better this year, so as a friend put it his AM, the case for standing pat

was growing weaker.

And because #TheKinkInTheCurve (the fact that the 10yr JGB yield was artificially low vs the rest of the interest rate curve) is not "Real Economy", it was effectively a central bank-driven outlier which had been overtaken by markets. So align.

Three months ago (8Sep), I posted the below (Twitter):

"This may be the most important chart in macro. This is what people are betting on.

It’s all there.

The Fed. The BOJ. Inflation. QE vs QT.

In one handy number."

And I still think THAT was the chart which mattered. It got worse, briefly, but we are now very clearly "over the hump", so it makes FX speculation tougher, which is now where the danger is - in further sharp USD/yen unwind.

That would "re-value" the yen-denominated foreign assets on household and corporate balance sheets, helping stocks lower a bit, but I note that with a lower 10yr $/yen forward, all those who had been thinking of a renaissance of re-shoring of Made In Japan

mfg is in customer currency and Japan is a net importer of services).

All in all, my immediate take is this is a 'tension release' for the BOJ, because the next 25-50bp on 10yr is "tougher" (and with 10yr forward, less needed unless US 10yr goes WAAAAY up). As such, it "looks" big because it is a "tightening" policy, but other than the kink, the market environment was already there. And I don't think this means an imminent hike of ON.

Near-term, my only "big" worries are chaos in the basis, knee-jerk reactions by lifers, etc because of it, and/or a very sharp move in USD/yen as buy-the-dip carry traders get stomped.

As I mentioned earlier, the move in late 1998 which hurt was the one AFTER the move from 146 to 132.