What if falling regional land prices erode collateral behind Japanese regional-bank SME loans?
Falling regional land prices erode the real-estate collateral behind a large share of regional-bank SME loans, lifting loss-given-default and forcing additional provisioning across already thin-capital lenders.
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The butterfly cascade
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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. Falling regional land prices erode the real-estate collateral behind a large share of regional-bank SME loans, lifting loss-given-default and forcing additional provisioning across already thin-capital lenders. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Recession signal ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.