Giant Hedge Fund Goes “Soros” On Bank Of Japan: Bets Billions That Japan, And MMT, Will Break | ZeroHedge

Saravelos also echoed what we said in our preview of the end of MMT, writing that he worries that “the currency and Japanese financial markets are in the process of losing any sort of fundamental-based valuation anchor” adding that “the more global inflation picks up, the more the BoJ prints. But the more easing accelerates, the higher the need to press hard on the brake when the (inflation) cliff approaches and the more dangerous it becomes. As a result, we will soon enter a phase where dramatic and unpredictable non-linearities in Japanese financial markets would kick in.” The DB strategist concluded by asking “if it becomes obvious to the market that the clearing level of JGB yields is above the BoJ’s 25 basis point target, what is the incentive to hold bonds any more?”

“We have a sizable short on JGBs,” Dowding, whose firm oversees about $127 billion across hedge funds and other fixed income products, said in an interview with Bloomberg on Monday. BlueBay started shorting Japan’s sovereign debt when the yen slid close to the 130 per dollar level several weeks ago, not too long after we wrote that “Yen At Risk Of “Explosive” Downward Spiral With Kuroda Trapped.

He is correct of course, and at some point the BOJ will pull a BOE, or SNB, and will decide that waste billions more to defend a largely arbitrary level is not worth it, at which point Japanese yields will spike higher… only instead of stopping at the next barrier, they will continue rising higher and higher, as traders from around the globe pile on in what may be the biggest central bank failure of the 21st century. Of course, it won’t be the last, because the inevitable loss by the BOJ will also be a loss for the idiotic economic theory behind much of modern economics, MMT. And when that too is discredited, all bets are off as the entire fiat financial system becomes unglued.

Giant Hedge Fund Goes “Soros” On Bank Of Japan: Bets Billions That Japan, And MMT, Will Break | ZeroHedge