Japan’s Bond Yield Surge Sparks Global Liquidity Shift as BOJ Policy Anchor Breaks
Japan's 10-year government bond yield surged to 1.85%, its highest since 2008, marking a decisive break from decades of ultra-low rates. The MOVE threatens to unwind the yen's role as the premier funding currency for carry trades, which previously funneled liquidity into U.S. Treasuries and risk assets globally.
Inflation persistence above the BOJ's 2% target for three consecutive years has forced markets to price in a potential December rate hike. Prime Minister Sanae Takaichi's tacit approval of tighter policy after meeting Governor Kazuo Ueda removes political barriers. 'The anchor is now breaking,' warns analyst Shanaka Anslem Perera, referencing Japan's three-decade dominance in suppressing global borrowing costs.
The seismic shift comes as Japanese institutions—holders of $1.1 trillion in U.S. debt—face newfound incentives to repatriate capital. With domestic yields turning attractive, the reversal could drain liquidity from crypto and other risk assets that thrived on cheap yen leverage.
