What if banks crowd JGBs into held-to-maturity to avoid losses but face hidden duration risk?
As yen yields rise, banks crowd JGBs into held-to-maturity buckets to avoid OCI hits, but the FSA flags that the resulting hidden duration losses leave the system vulnerable if liquidity needs force HTM sales at depressed prices.
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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 (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 1–3 years 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. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. As yen yields rise, banks crowd JGBs into held-to-maturity buckets to avoid OCI hits, but the FSA flags that the resulting hidden duration losses leave the system vulnerable if liquidity needs force HTM sales at depressed prices. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Real yields ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.