The market dislocation index for Japanese government bonds spiked to 9.5 basis points, the highest ever and way higher than in the Great Financial Crisis.

This index measures the divergence of Japan's bond yields from their theoretical values, with higher readings indicating WORSE market functioning.

This comes as just $280 million in trading triggered a $41 billion wipeout across Japan's $7.2 trillion bond market on Tuesday.

The market has become dangerously illiquid as the BoJ reduced bond purchases and life insurers pulled back at a record pace.

Foreign investors now account for 65% of monthly cash JGB transactions, up from just 12% in 2009.

These shorter-term foreign traders have replaced long-term domestic holders, amplifying volatility.

Japan's bond market has become a systemic WEAK SPOT in the global financial system.