In January 2016, the Bank of Japan (BoJ) shocked investors with its announcement that it would cut its benchmark interest rate below 0, to -0.1%. The policy was implemented as a way to curtail the effects of falling oil prices and the slowdown of global markets.

Haruhiko Kuroda, the governor of the Bank of Japan, also hoped it would be a way to squeeze Japanese investors out of foreign safe havens and into Japan’s money markets to stimulate economic growth.

Instead, as early as two months into Japan’s negative rate experiment, the BoJ’s bold move had met with disappointing results. In many cases, the negative interest rate has backfired.

Instead of convincing Japanese investors to dump their excess money into Japanese markets, the BoJ’s move has led to a record surge in Japanese investments in the U.S. debt market, specifically Treasuries and bonds. In March, Japanese investors bought $31.3 billion worth of U.S. bonds, a four-year high. Additionally, the new interest in U.S. bonds comes from Japanese institutions, like banks and life insurance companies, that have historically been focused on long-term investments in domestic markets.

Japan’s negative rate experiment isn’t going as planned; the biggest three factors of the disappointing outcome for the BoJ are:

1. Low conviction from Japanese investors

The BoJ’s negative rate experiment is just the latest development of Abenomics, a series of economic policies advocated by Prime Minister Shinzō Abe since 2012. The Economist described Abenomics as a “mix of reflation, government spending and a growth strategy designed to jolt the economy out of suspended animation that has gripped it for more than two decades.”

Mr. Kuroda, the BoJ governor, firmly believes in Abenomics and in the long-term gains to be had from negative interest rates.

But, in the face of a policy designed to penalize investors depositing into safe havens, Japanese investors don’t have the same conviction. Instead of embracing uncertainty at home, they are hedging their bets in traditionally stable foreign investments, like U.S. Treasury bonds, mortgage bonds, real estate bonds, etc.

2. The yen is rising against expectations

The prospect of a weaker yen, which would have supported Japanese exporters and bolstered support for the BoJ’s decision, remains to be seen. In fact, another major reason Japanese investors are flocking to U.S. bonds is because of the unexpected rise of the Japanese yen. In April, the yen surged to 18-month highs against the U.S. dollar.

Odds of Interest Rate Increase

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Japanese investors are understandably concerned. “Every day is like being in Alice in Wonderland” said Tomohisa Fujiki, head of interest-rate strategy at BNP Paribas Securities Japan. “Interest-rate levels are having little effect on credit demand…You can’t expect everything to go according to plan.”

Despite expectations, the yen has re-emerged as a haven currency amid tumultuous global markets, and because the U.S. Federal Reserve recently dialed back its interest rate increases. Traders have also bolstered the yen out of a belief that the BoJ is out of runway for its easing of monetary policy.

3. The unexpected effect of Brexit

Most recently, Britain’s shocking exit from the European Union (Brexit) has left investors around the world stunned and anxious about the future.

In the meantime, the value of both the pound and the euro have fallen, Britain’s markets are in turmoil, and the European market as a whole is much more unappealing to risk-averse investors. In turn, the U.S. and its bonds have become the most appealing option for the majority of Japanese investors who don’t want to deal with negative interest rates.

David Davis, the new “Brexit minister”, has announced that Britain expects to leave the EU by December 2016. That’s almost five months from now, so it’s unlikely that conservative investors (especially large institutions like banks) will have high conviction in European markets until the true long-term effects of Brexit play out in 2017.

What will Japan do next?

Abenomics has been a mixed bag for Japanese markets since it was implemented. But Japanese policymakers aren’t backing down from it. Mr. Kuroda has asserted that he is more than willing to “take additional easing measures in terms of…quantity, quality and the interest rate if it is judged necessary.”

How Japan’s negative interest rates will affect investors in the long run remains to be seen.