Japan Bond Yields Surge to 1.85%, Raising Concerns Over Global Liquidity

Japan’s 10-year government bond yield has surged to 1.85%, the highest level since 2008, signaling a seismic shift in monetary policy. Persistent inflation above the Bank of Japan’s 2% target for over three years has forced markets to recalibrate expectations. Swap markets now anticipate a potential rate hike at the Bank of Japan’s December 18-19 meeting, further pressuring yields upward.

The ramifications extend far beyond Japan. For decades, the yen served as the linchpin of global carry trades, fueling liquidity in U.S. Treasuries, European bonds, and risk assets worldwide. As Japan abandons its ultra-low rate regime, investors brace for potential ripple effects across equity markets, emerging economies, and cryptocurrency valuations. The ¥21.3 trillion stimulus package compounds these pressures, driving long-term yields higher.

Market participants now question whether this marks the end of an era—one where Japanese capital flows underwrote global asset prices. The coming months may test the resilience of digital assets as traditional markets adjust to tightening liquidity conditions.