They have a debt of 10 trillion dollars. The yields on all Japanese government bonds have just reached their all-time high. Next week, Japan will begin selling 500 billion dollars in U.S. stocks to stabilize the economy. Its economy is collapsing, and it is much worse than most believe: if Japan collapses, it does not do so alone. It drags down the global financial system with it. They only survived because interest rates were close to zero. That support has evaporated. Now, with rising yields, the accounts are complicated quickly. Debt payments are soaring. Interest consumes government revenue. No modern economy comes out unscathed from this: → Default → Restructuring → Or inflation. But here is where it affects everyone else. Japan holds trillions of dollars in foreign assets. More than 1 trillion dollars in U.S. Treasury bonds. Hundreds of billions in global stocks and bonds. They bought all that because Japanese yields returned nothing. Now Japanese bonds finally pay real returns. After hedging, U.S. Treasury bonds actually lose money for Japanese investors. This is not fear. It is simple math. Money is coming home. Hundreds of billions leaving global markets is not gradual. It is a liquidity vacuum. Then there is the yen carry trade: over 1 trillion dollars borrowed cheaply in yen and invested in stocks, cryptocurrencies, emerging markets... anything with yield. As Japanese rates rise and the yen strengthens, those trades explode. Forced selling begins. Margin calls spread. Everything moves in tandem. At the same time: → The yield spreads between the U.S. and Japan are narrowing → Japan has fewer reasons to keep money abroad → Borrowing costs in the U.S. rise, whether the Fed likes it or not. And the Bank of Japan is not done yet. Raise rates again in January? The yen skyrockets. Carry trades unwind more forcefully. Risk assets feel it immediately. Japan cannot simply print its way out this time. Inflation is already running hot. Print more → Yen fall → Rising import costs → Internal crisis. They are caught between debt and currency, and the door is closing. For 30 years, Japanese yields were the invisible anchor that kept global rates low. All portfolios since the 90s depended on it, whether they realized it or not. That anchor has simply broken. Bonds are falling. Stocks are falling even more. Cryptocurrencies are falling the most. This is how the feeling of "all is well" turns into a total collapse at once. The world is entering an interest rate environment that no one alive has experienced before.
If you don't connect the dots, you're not understanding.
