NIRP Kills Off All Money Market Funds in Japan

And the Bitter Irony?
All 11 Japanese asset managers that offer money market funds have stopped accepting new investments into them and are planning to scuttle them after returning their remaining assets to investors. This marks another big accomplishments of negative interest rates.
After years of zero-interest-rate policy, and after gobbling up every Japanese government bond that wasn’t nailed down, the Bank of Japan decided in January to go beyond what had already failed and introduced its negative-interest-rate policy.
As a result of QQE, as it calls its asset-buying program, and the new NIRP, even the 10-year JGB yield is now negative, and yields on shorter maturities are sinking deeper into the negative. Money market funds, which invest in commercial paper and government debt with maturities of less than one year, are at risk of seeing these negative yields eat into their principal.
Money market funds, unlike bank deposits, do not guarantee the principal, but due to their reliance on short-term paper with high credit ratings, they’re considered one of the safest investments, and falling below par value is considered bad form and can trigger runs on the offending fund and neighboring funds by spooked investors.

This post was published at Wolf Street by Wolf Richter ‘ March 9, 2016.