It was a messy and historic day for Japan’s financial markets as equities slumped, the yen soared and 10-year bond yields went sub-zero. What a time to be alive.

Japanese shares were lower right from the outset, as was the Australian market, as bourses latched on to a bank-led sell-off in the US and Europe on Monday, writes Peter Wells.

The Nikkei 225 ended 5.4 per cent lower, its worst one-day drop since June 13, 2013 when it fell 6.4 per cent. The broader Topix was down 5.5 per cent, its biggest drop since a 5.9 per cent fall on August 24 last year.

The Nikkei is only 68.2 points, or 0.4 per cent, away from breaching its January 21 low and falling to its lowest level since October 30, 2014 – the session before the Bank of Japan doubled-down on its stimulus programme and vowed to expand the asset base by Y80tn per year.

Those early declines started to blow out as the yen strengthened, breaching the Y115 per dollar mark and strengthening as much as 1.4 per cent to Y114.21 per dollar – a 15-month high.

It was only a matter of time, then, till the yield on the benchmark government 10-year bond turned negative for the first time. And they did, closing at the session low of -0.075 per cent. That’s a 12 basis point drop from yesterday’s close of 0.045 per cent.

Japanese government bond prices, which move in the opposite direction to yields, have soared since the Bank of Japan surprised markets on January 29 by adopting negative interest rates.

Whereby easing monetary policy should weaken a currency, the opposite has happened. Then yen is now stronger than before the BoJ’s surprise move and is the best-performing major currency this year, up 4.8 per cent versus the US dollar.

Haruhiko Kuroda, the BoJ’s governor, has said there are “no limits” to monetary easing, which is a bit of a Catch-22. Some investors may want to test that out, and a stronger yen arguably gives the central bank a reason to support parts of its economy that are being hurt by the currency.

But as the government purchases bonds as part of its quantitative easing programme, investors know there’s a buyer on the other end ready and waiting. And in order to buy JGBs, you need yen, which could be another reason behind the upward pressure on the currency.

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