Japan's 10-year bond yield just hit 2.38%, its highest level since 1999. That chart is 25 years of near-zero rates ending in a vertical line.
This matters far beyond Japan.
For decades, Japan was the anchor of global cheap money. The Bank of Japan held rates at or below zero while every other major central bank moved through normal cycles. That created the yen carry trade, borrow in yen for nearly nothing, invest the proceeds in higher-yielding assets everywhere else. US Treasuries, emerging market debt, corporate bonds, real estate. Trillions of dollars of global investment was funded by cheap Japanese money.
That trade is now unwinding.
The trigger is the Strait of Hormuz. Japan imports 96% of its crude from the Middle East, and virtually all of it passes through the strait. When Iran shut it down, energy costs in Japan exploded. The yen fell to 160 against the dollar, making dollar-priced oil even more expensive. Inflation expectations surged. The bond market did what bond markets do when they smell inflation, it sold off.
Markets are now pricing in a 60-70% chance the Bank of Japan raises rates again at its April 27-28 meeting. Goldman Sachs sees July. Either way, the direction is clear.
Here's why this matters globally: when Japanese yields rise, Japanese investors, the largest foreign holders of US Treasuries and European debt, start bringing money home. Why buy a US 10-year at 4.3% and take the currency risk when you can get 2.4% at home risk-free? The January bond selloff in Japan already forced a violent repricing in US Treasuries within days.
Japan ran the longest zero-rate experiment in modern history. It's over. And every government that relied on cheap Japanese capital to finance its own deficits is about to feel it.












