Ahead of tonight's 10Y JGB auction and reportedly the unleashing of Abe's fiscal stimulus, it appears the world's investors are losing faith in the Bank of Japan's buying power and the MoF's credibility as Japanese government bonds are collapsing for the 3rd day in a row. With the biggest crash in prices (JGB Futures) since May 2013 (back to 5 month lows), yield across the entire JGB curve are exploding higher since Kuroda punted last week and questioned monetary policy effectiveness.

As the world awaits Japan's over-promise and under-deliver fiscal stimulus...

• *SAKAKIBARA SAYS HE DOESN'T THINK ABENOMICS HAS FAILED
• *JAPAN FISCAL STIMULUS PLAN ALREADY PRICED IN, SAKAKIBARA SAYS
• *ABE STIMULUS PLAN WON'T HAVE A MAJOR IMPACT, SAKAKIBARA SAYS

"The fiscal spending will probably include public works spending, so we can expect something of an economic boost," said Masaki Kuwahara, an economist at Nomura Securities Co. in Tokyo. But such growth may not be sustainable. "What Japan needs to do is to spur more demand and increase productivity by pushing through deregulation, increasing the nation’s potential growth rate.”

It appears demand for direct monetization of the debt and questioning BoJ capabilities (and therefore independence)...

• *JAPANESE GOVT GROWS SKEPTICAL OF BOJ'S INFLATION TARGET: NIKKEI
• *DLR/YEN WILL SLOWLY APPRECIATE TO 100 YEN: SAKAKIBARA
• *HAMADA REITERATES OPPOSITION TO HELICOPTER MONEY
• *HAMADA FAVORS RECOGNIZING DE-FACTO DEBT MONETIZATION
• *HAMADA FAVORS JAPAN PROCLAIMING A DEBT-MONETIZING POLICY

One of Prime Minister Shinzo Abe’s top advisers says he favors a declaration by Japan’s policy makers that their current measures are monetizing the nation’s debt.

Some people say that Japan has "already adopted ad hoc monetization of debt, and that to improve public confidence the government and the BOJ should recognize that they are doing already a combination of fiscal stimulus and de facto monetization," Koichi Hamada, a former Yale University professor, said in an e-mailed response to questions.

"Given this long deflation and liquidity-trap type of behavior of Japanese banks and firms, I am now inclined to join the ranks" of those commentators, Hamada said. That view says "piecemeal and de facto monetization should be rather highlighted to change investors’ psychology," he said.

Hamada declined to comment specifically on the Bank of Japan’s July 29 decision to conduct a "comprehensive" assessment of its measures at its next meeting, or whether it’s likely to expand stimulus further at that gathering, which is scheduled for Sept. 20-21.

The adviser also reiterated his opposition to "helicopter money." "If one institutionalizes helicopter money or monetization of the new debt, the economy loses the safeguard against inflation."

Through its easing to date, the BOJ has gobbled up more than one third of outstanding Japanese government bonds, and some observers don’t anticipate that debt will ever return into the hands of private investors. BOJ officials in the past debated a strategy of maintaining a large balance sheet -- at least back in 2014, according to people familiar with the talks at the time. The context then was to avoid any spike in bond yields when the central bank reached its inflation target.

JGB yields are rising on concerns that BOJ’s planned comprehensive assessment of its policy, announced by Kuroda last week, will set back its monetary-easing stance...

Sending bond prices reeling...

This is the biggest 3-day drop since May 2013.

Is this the market pushing back demanding BoJ action... or the rebirth of the widowmaker trade?