The worldโs biggest financial experiment is nearing its breaking point.
Japan isnโt just juggling debtโitโs pulling off the most extreme macroeconomic balancing act on Earth. With its debt-to-GDP ratio approaching 260%, the whole system only works as long as the 10-year yield stays under control.
If that yield were to rise freely, the math collapses: interest payments skyrocket, tax revenue gets swallowed by debt servicing, and fiscal stability evaporates.
Thatโs why Yield Curve Control (YCC) exists. By capping long-term yields, Japan can keep rolling over its massive debt pile at near-zero costโessentially transforming it into a perpetual liability. Inflation quietly eats away at the debt, allowing a โsoft defaultโ rather than a violent one.
But cracks are forming. The 10-year yield just hit a 30-year high, and the market is starting to push back. Control is slippingโand when it goes, the fallout wonโt stop at Japanโs shores.
Global markets, take note.
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