What if the BOJ's unrealised bond losses exceed its own capital?
BOJ mark-to-market JGB losses exceeding capital is an optics shock, not a funding event — a central bank with the printing press can't be insolvent in its own currency — but it dents yen-anchor confidence and pressures carry and credit at the margin. No true analogue; closest is the 2022-23 SNB and Fed paper-loss debates that moved sentiment, not solvency. Forward: the real risk is political pressure to slow normalization, capping JGB yields and weakening the yen.
how we built this number — every step
The class rate is measured from our dated, sourced event library (decade-normalized Poisson — the full table is public at base_rates.json). The variant’s share within its class is the analyst’s editorial call, published so you can audit it. A wider range means thinner precedent. Full recipe: methodology · scored at Reality Check.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (gold) over time vs the crowd's (Polymarket, blue), from the past toward the 6–18 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. The gold path is an illustrative reconstruction anchored to today's estimate — real dated events, not a live re-estimate history.
What it would mean
If this plays out, it is a risk-off shock. A rate-normalizing BOJ reveals mark-to-market JGB losses exceeding its capital, raising solvency questions for the yen's anchor. The trigger decomposes into signed root‑shocks — FX carry appetite ▼ · Credit spreads ▲ — which propagate through our causal graph to the markets below.
If it happens — the markets it would move
Biggest moves first. Projected moves are cascade-model priors; hist A–B% = what comparable past events actually did (measured abnormal returns), and model prior · unmeasured marks markets with no analogue backing yet. Tap any market for its price history.
| Market | Class | Projected move | |
|---|---|---|---|
| 1 | High-yield credit HYG 📈 chart | Rate | ▼ -0.6% hist -0.78–-0.01% · other way -0.23% (n=12) |
| 2 | Financials XLF 📈 chart | Equity | ▼ -0.4% hist -0.29–-0.05% · other way -0.27% (n=12) |
| 3 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▼ -0.4% hist -6.56–+1.46% · other way +23.24% (n=12) |
| 4 | JPMorgan JPM 📈 chart | Equity | ▼ -0.3% hist -0.49–+0.53% · other way +0.99% (n=12) |
| 5 | Volatility (VIX) VIXon Hyperliquid 📈 chart | Vol | ▲ +0.3% hist -0.05–+0.49% · other way -7.07% (n=12) |
| 6 | USD/JPY USDJPYon Hyperliquid 📈 chart | FX | ▼ -0.2% hist -0.41–+0.52% · other way +0.37% (n=12) |
| 7 | Aussie dollar AUD 📈 chart | FX | ▼ -0.2% hist -1.19–+0.25% · other way -1.81% (n=12) |
| 8 | S&P 500 SPXon Hyperliquid 📈 chart | Index | ▼ -0.2% hist -0.16–+0.21% · other way +0.24% (n=12) |
| 9 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▼ -0.2% hist -9.49–+1.65% · other way +9.75% (n=11) |
| 10 | Turkish lira TRY 📈 chart | FX | ▼ -0.2% hist -3.32–+1.14% · other way -0.66% (n=12) |
| 11 | Indian rupee INR 📈 chart | FX | ▼ -0.2% hist -0.86–+0.23% · other way -0.75% (n=12) |
| 12 | Nasdaq 100 NDXon Hyperliquid 📈 chart | Index | ▼ -0.2% hist -0.75–+0.18% · other way +0.63% (n=12) |
Probable recommendation
Historical precedent — what analogous events actually did
Across 40 analogous events (overlap‑weighted), as abnormal returns — market beta stripped, so it's the event's own effect, not the market backdrop. Shown at 20 days (persistent) and 5 days (immediate); ↺ fades = the two horizons disagree. Confidence = consistency × sample × significance.
| Asset | History says | Abnormal (20d · 5d) | Hit | n | Confidence | vs cascade |
|---|---|---|---|---|---|---|
| Bitcoin BTC | SHORT | -7.9% · 5d -4.5% | 71% | 21 | 0.35 | ✓ matches cascade |
| High-yield credit HYG | SHORT | -0.5% · 5d -0.0% | 68% | 37 | 0.28 | ✓ matches cascade |
| MSTR MSTR | SHORT | -5.6% · 5d -3.0% | 67% | 39 | 0.28 | ✓ matches cascade |
| AUD AUD | SHORT | -1.0% · 5d -0.3% | 63% | 38 | 0.25 | ✓ matches cascade |
| SPX SPX | LONG | +0.3% · 5d +0.2% | 62% | 40 | 0.22 | ⚠ differs |
| NDX NDX | SHORT | -0.6% · 5d -1.3% | 60% | 40 | 0.17 | ✓ matches cascade |
| TRY TRY | SHORT | -3.0% · 5d +0.1% ↺ fades | 58% | 38 | 0.15 | ✓ matches cascade |
| INR INR | SHORT | -0.7% · 5d -0.1% | 58% | 38 | 0.15 | ✓ matches cascade |
| US dollar DXY | LONG | +0.7% · 5d +0.4% | 57% | 40 | 0.13 | · |
| USDJPY USDJPY | LONG | +0.7% · 5d -0.0% ↺ fades | 52% | 39 | 0.03 | ⚠ differs |
| 10y yield DGS10 | SHORT | -1bp · 5d +1bp ↺ fades | 51% | 40 | 0.02 | · |
| Gold XAU | SHORT | -0.8% · 5d -0.6% | 51% | 39 | 0.01 | · |
| XLF XLF | LONG | +0.1% · 5d -0.7% ↺ fades | 49% | 39 | 0.00 | ⚠ differs |
| JPM JPM | LONG | +0.7% · 5d -1.0% ↺ fades | 44% | 40 | 0.00 | ⚠ differs |
Why this probability
MTM JGB losses real as rates rise, but losses-exceed-capital solvency framing overstated; 18mo. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.