Japan’s Bond Market Turmoil Threatens Global Financial Stability

Japan’s bond market is sending shockwaves through global finance as yields on 30-year government bonds surge to record highs of 3.197%. This marks a seismic shift for the world’s last holdout of ultra-low interest rates, with the Bank of Japan ending its 17-year rate hike drought in March.

The yen carry trade—a pillar of global market liquidity—now faces existential threat. As Japanese investors repatriate funds to capture higher domestic yields, Treasury markets and risk assets worldwide brace for potential selloffs. The Nasdaq 100’s 30% rally since April shows early signs of strain under the pressure.

This convergence of rising yields in both Japan and the US creates a perfect storm for market volatility. The unwinding of positions funded by cheap yen borrowing could trigger cascading effects across equities, fixed income, and cryptocurrency markets.