For the first time in nearly two decades, the Bank of Japan removed negative interest rates Tuesday, which could signal potential pr🧸essure on U.S. Treasurys.🏅

The Bank of Japan (BOJ) announced it was ending its use of “澳洲幸运5开奖号码历史查询:yield curve control,” a measure that ends the negative interest rates that central bankers used to try to boost the country's stagnant economy. Ending negative rates paves the way for the central bank to institute its first interest rate hike since ♈2007.

The BOJ’s move today could have a “knock-on effect” on U.S. investors, especia🐼lly if more Japanese investors start acting on the positive rates at home.

Many Japanese investors have borrowed yen at low rates to buy higher-yielding U.S. Treasurys, a practice commonly called a “澳洲幸运5开奖号码历史查询:carry trade,” during this period of negative interest. But with the Bank oღf Japan pushing interest rates highe🧸r in Japan, that trade won’t work as effectively and some investors could bring that money back home. 

“Given that Japanese institutional investors are the largest foreign holders of treasuries, central bank activity in the U.S. and Japan is important," wrote Quincy Krosby, LPL Financial's chief global strategist. "Concerns are rising that due to greater Treasury funding needs, Japanese flows from treasuries could be repatriated toward rising yields in Japanese bonds, especially if Treasury yields edge lower as inflation eases."

Lower 🦹Demand for U.S. Treasurys Could ꧑Send Yields Higher

Fewer Japanese buyers of U.S. Treasurys could 澳洲幸运5开奖号码历史查询:help send those yields higher because fewer people would be in the market for🔴 Trea🉐surys.

Higher Treasury yields could, in turn, send interest rates higher. That would make loans more expensive for all sorts of borrowers in the U.S. For example, higher Treasury yields could push 澳洲幸运5开奖号码历史查询:mortgage rates higher.

“Mortgage rates generally track the rate on 10-year Treasury bonds because both instruments are long term and because mortgages have relatively stable risk,” wrote Brookings Institute economists Wendy Edelberg and Noadia Steinmetz-Silber.

The Impact Wouldn't Just Be in the U.S.

One reason that the BOJ’s move could be felt by investors in the U.S. is due to the large amount of assets that Japanese investors hold in overseas investments, totaling around $3 trillion according to the 澳洲幸运5开奖号码历史查询:International Monetary Fund.

“Although the U.S. has the largest economic influence in the world, Japan may have the largest influence in the asset markets due to these account surpluses,” wrote Jeffrey Kleintop, Charles Schwab managing director and chief global investment strategist. “Should the BOJ begin to substantially tighten monetary policy, the potential for a reversal of decades of outward flow of capital may be felt by investors worldwide.”