Japan's long-term Intrerest Rate surges, a "time bomb" in the global financial market?! Beware ⚠️

The yield on Japan's 30-year government bonds soared to a record high of 3.15% today, which may seem like a "local news" story on the surface, but it actually hides a ticking time bomb for the global financial system.

For decades, Japan has relied on "zero interest rates + money printing" to sustain its huge national debt. Japan's debt is equivalent to over 260% of its GDP, the highest in the world! In the past, low interest rates were manageable, but now that interest rates have risen, the cost of debt is snowballing. The interest payments alone consume over 20% of tax revenue, putting immense pressure on the finances.

So what does this have to do with global finance? Let me explain briefly.

1️⃣Japan may sell US Treasuries to recover funds: Japan is the largest overseas buyer of US Treasury bonds, holding over $1.1 trillion. Now that domestic bond interest rates in Japan have risen, Japanese bonds are more attractive, and Japan may sell US Treasuries to bring the money back home (called "capital repatriation").

2️⃣ U.S. Treasury Interest Rates Impacted: With less buying, the U.S. can only raise interest rates to attract funds, leading to an increase in U.S. Treasury yields, which in turn raises mortgage, auto loan, and credit card rates, making loans more expensive for the public.

3️⃣ The US dollar weakens, and the yen strengthens: The Japanese exchange back to yen, the US dollar is being sold off, and the dollar exchange rate may decline. This will exacerbate the import-driven inflation in the US, making imported goods more expensive.

4️⃣Market volatility increases: Japan is the global financial "stabilizer" with a massive amount of funds. If the Japanese government bond market becomes turbulent, it could trigger a chain reaction, potentially igniting a liquidity crisis in global bond and stock markets.

Overall, similar to the logic discussed yesterday, we need to pay attention to the global bond market. Japan's recent rise in 利率 is not just a problem for Japan, but rather a "catalyst" for the overall increase in global funding costs. If this is not controlled, the next few years may see a combination of "debt burden + interest rate shock", which will be a headache for central banks around the world.

Just like yesterday, Japanese Prime Minister Shigeru Ishiba stated that the current financial situation is "worse than Greece"! Be cautious, be cautious ⚠️