As a prelude to the following dismal market update, Japan just posted the largest annual trade deficit ever (ever ever ever) at JPY 11.47 trillion... so much for Abenomics and the magic J-Curve as the year just got worse (not better). With the Nikkei 225 (cash) down over 400 points (as we would have expected given futures action) and back under 15,000; Japanese stocks are at 7-week lows but Japanese credit risk is rapidly accelerating lower at its riskiest in 10-weeks. Japanese government bonds are well bid with yields on the 20Y having dropped to 1.443% - the lowest since April 2013. Away from Japan, the iTraxx Asia index (which tracks credit risk of investment grade corporates) has soared in the last few days to almost 5-month highs. Emerging Market Sovereign CDS are all notably wider with Vietnam and Indonesia topping the relative moves so far (and most at multi-month wides). Chinese repo is stable for now (CDS are wider by 2bps at 7-month wides) but so far, no good, for those believing the contagion in EM FX will remain contained.

The largest annual trade deficit ever ever ever for Japan...

and no sign of the mythical J-Curve...17th monthly deficit in a row, worst in a year

As we warend a year ago - its going to be a cold, expensive winter for the Japanese (as the de-nuclearization and de-valuation of the currency crushes their dreams as energy costs soar) - and we were right...

As the trade data shows - mineral fuels 36.6% of total imports, rose 24.2% Y/Y

 

As the price soars by the most YoY in almost 2 years...

 

It appears even Goldman Sachs has given up on the J-Curve (perhaps the "J" really stands for "Just Kidding")

Goldman Japan Trade Outlook - Trade balance to remain in the red, likely delay in J curve effect: We expect the trade balance to remain in the red in the near term, but we see a gradual improvement over time in line with the J curve effect. With the boost to export volumes from yen depreciation weakening, however, we draw attention to structural changes in imports, including higher electrical machinery imports.

Japanese stocks catching down to credit's early warnings....

and Japanese bonds surging (yields tumbling) as quasi safety is sought...

And Emerging Market CDS are surging...

Charts: Bloomberg