As North America moves near zero (ZIRP) and possibly negative policy rates (NIRP) in the months ahead, Japan remains the leading test case for these experiments, and investors would be wise to take note. Nearly 30 years of zero and negative interest rates and asset buying by the Bank of Japan, and government debt has topped 250% while the economy has flatlined and the Nikkei 225 stock index remains 45% lower than it peaked in 1989.

Meanwhile, the viability of retirement, pensions, life insurance companies and Japanese banks has steadily eroded.For the latest see WSJ Japanese Banks are circling the drain:

Since March 2016, shortly after the country’s negative interest rate policy was introduced, net income at major banks has declined by a fifth. At regional banks, the decline has been steeper: Net income is a third below its level three years ago.

Practically all of Japan’s regional banks have seen their share prices fall in the past 12 months. More than half have had declines exceeding 30%. They have underperformed the broader Japanese market for decades.

Desperately seeking yield spread, institutions and individuals have increased FX and credit risk to make loans in other currencies and buy foreign assets including US and European collateralized debt obligations full of junk-rated loans.

We saw similar moves before the 2008 financial bust. Only this time, debt and leverage levels in the financial system are significantly higher, and baby boomers are ten years older, with less time to grow back capital. This next loss cycle will be devastating for many.