🚨 BREAKING NEWS:
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Japan just sent a major shockwave through global markets. Its 30-year government bond yield has hit around 3.5% — the highest ever, while the 10-year yield is near 2.1%, a level not seen in decades. This is a huge moment because Japan is finally moving away from its long era of ultra-low interest rates. Recent Bank of Japan rate hikes confirm one thing clearly: easy money in Japan is ending.
Why does this matter globally? For years, investors borrowed cheap Japanese yen and invested that money all over the world — in U.S. stocks, bonds, emerging markets, and real estate. This is called the yen carry trade. Now, as Japanese yields rise, that trade is starting to unwind. Trillions of dollars may slowly move back to Japan, draining global liquidity. When liquidity disappears, markets usually become more volatile and borrowing becomes more expensive.
The risk is even bigger because Japan is one of the world’s largest creditor nations. Its investors hold massive amounts of U.S. Treasuries, European bonds, and emerging-market debt. Japan alone owns about $1.13 trillion of U.S. Treasuries, making it America’s largest foreign holder. If Japanese investors shift money back home to earn higher yields, U.S. and global yields could rise, tightening financial conditions without the Federal Reserve doing anything. This may help explain why the Fed has recently sounded more cautious and supportive.
The big question now is uncomfortable but important: will the Fed be forced to ease policy even more just to offset what Japan has started? Markets are watching closely, because this isn’t just a Japan story anymore — it could quietly reshape the global financial system.