What if BoJ normalization triggers a wave of zombie-firm insolvencies across Japan?
BoJ normalization ends the era of free refinancing for Japan's large stock of zombie firms, and a wave of insolvencies among low-productivity, over-indebted companies drives a step-change in bank credit costs.
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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. BoJ normalization ends the era of free refinancing for Japan's large stock of zombie firms, and a wave of insolvencies among low-productivity, over-indebted companies drives a step-change in bank credit costs. 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.