🚨 Why Japan Could Become a Major Market Risk Very Soon
Japan is entering a critical phase that most investors are underestimating.
Government debt has exceeded $10 trillion, and Japanese government bond yields are now at multi-decade highs.
This shift alone has serious implications for global liquidity.
For decades, Japan survived because interest rates were near zero.
That era is over.
As yields rise: • Debt servicing costs accelerate
• Government revenues are increasingly absorbed by interest payments
• Financial stability becomes fragile
📉 The global impact starts here
Japan is not an isolated economy.
It is one of the largest international investors: • Over $1T in U.S. Treasuries
• Hundreds of billions in global equities and bonds
Capital flowed overseas because domestic yields were uncompetitive.
That incentive is fading.
With higher local yields and currency hedging costs rising,
many foreign assets no longer make sense for Japanese investors.
This points to one thing: Capital repatriation.
Large-scale repatriation doesn’t happen quietly.
It creates global liquidity gaps.
📌 Add the yen carry trade into the equation
Over $1 trillion borrowed cheaply in yen and deployed into: stocks, crypto, and emerging markets.
As Japanese rates rise and the yen strengthens: • Carry trades unwind
• Forced selling increases
• Correlations spike across risk assets
📊 At the same time: • U.S.–Japan yield spreads are shrinking
• Japan has less incentive to keep capital abroad
• Global borrowing costs trend higher
⚠️ Bottom line
Japan is trapped between: High debt
Currency sensitivity
Inflation that limits aggressive money printing
For 30 years, ultra-low Japanese yields acted as a hidden anchor for global rates.
That anchor is no longer secure.
Markets may ignore this temporarily,
but when capital flows reverse,
the impact tends to be fast — and hardest on risk assets.
This isn’t fear.
It’s macro mechanics.
#Crypto #Forex #Yen #MarketRebound