Not unanimous: BOJ decision on negative rates had four dissenters

The market turbulence is getting messier in Japan.

The stock plunge in Tokyo follows losses Monday for US and European indexes.

The cost of insuring bank debt against default also climbed to its highest since late 2013. In the case of Germany and The Netherlands, government bonds with maturities as far out as seven years have negative yields, and even in the so-called periphery of the eurozone, countries such as Italy and Spain have seen their short-term sovereign bond yields (maturities up to two years) dip into negative territory. That drove the yield on the bonds below zero, meaning buyers of the bonds are essentially taking a loss just to hold those assets. Switzerland 10-year bonds now yield negative 0.28 percent, although the country’s bond market is smaller than Japan’s.

“Negative interest rate will have larger side effects on the functioning of financial markets and the financial system than positive effects on the real economy”, the summary showed.

The Bank of Japan’s recent shift to negative rates has fuelled concerns that ever-more exotic monetary policy is rapidly reaching the point of diminishing returns.

Low oil prices have continued to unsettle investors.

The U.S. five-year Treasury yield (U.S.: US5Y) also fell to around 1.1112 percent in Asia trading hours, its lowest since June 2013, when markets convulsed during the taper tantrum after the U.S. Federal Reserve first broached the idea that it would be tapering its quantitative easing program. In the case of BTMU, interest rates will be cut by 0.015 percentage points to 0.06 percent, and for its “Super Teiki” (Super fixed-term accounts), whose deposits are less than 3 million yen, interest rates will be set at 0.025 percent for all fixed terms between one month and 10 years.

Cheap oil is great for consumers but its speculator slump continues to alarm investors who fear it signals that something isn’t quite right about the health of the broader economy.

The Chinese markets are closed this week for the Lunar New Year holiday. In Australia, one of the big markets that was open, stocks dropped 3%.