Japan has been experiencing very low interest rates for more than 20 years now. The yield on 10 year Japanese bonds first dropped below 2% in 1997 and has since then steadily trended lower over the years. In 2016 these bonds first went in to negative territory, meaning that the interest rate dropped below 0%. Currently Japanese 10 year bonds have been at or below 0% for almost 4 years now.
The performance of Japanese bank stocks has been horrible over that same period to say the least. The index is at the lowest point in its existence.
The ECB has kept interest rates below 0% since 2014. In this period yields on most government bonds of Eurozone countries have steadily declined below zero. Countries like Germany and the Netherlands even have their whole yield curve below zero.
So the question arises. Does the performance of Japanese banks show what future holds for the performance of European bank stocks? Lately, European banking stocks hit their lowest price in the last 30 years. Wiping out all gains made since the ’80’s.