What if BoJ exit from yield curve control balloons aggregate unrealized securities losses at regional banks?
Regional banks' aggregate unrealized securities losses (yen and foreign bonds) balloon past prior peaks as the BoJ exits YCC, with the FSR flagging that loss-absorption capacity at lower-rated regionals is thin relative to held-to-collect bond books.
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The butterfly cascade
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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 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. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Regional banks' aggregate unrealized securities losses (yen and foreign bonds) balloon past prior peaks as the BoJ exits YCC, with the FSR flagging that loss-absorption capacity at lower-rated regionals is thin relative to held-to-collect bond books. 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.