wefwatch

JAPAN JUST PULLED THE PIN — GLOBAL MARKETS HAVE 48 HOURS
Japan is about to do what almost no one thinks is possible.
Today, the Bank of Japan is hiking rates again — pushing government bond yields to levels the modern financial system has never seen.
This isn’t just a local event.
This is a global stress test.
For decades, Japan survived on near-zero rates.
That was the life support keeping the system alive.
Now it’s gone — and the numbers get brutal.
Here’s why this can break things fast:
Japan holds roughly $10 TRILLION in debt, growing daily.
Higher yields mean:
→ Debt servicing costs skyrocket
→ Interest eats into government revenue
→ Fiscal flexibility disappears
No modern economy gets through this cleanly:
→ Default
→ Restructuring
→ Or inflation
The hidden global shockwave
Japan also holds trillions in foreign assets:
$1T+ in U.S. Treasuries
Hundreds of billions in global stocks and bonds
Those investments made sense when Japanese yields were near zero.
Now? Domestic bonds finally pay real returns.
After currency hedging, U.S. Treasuries actually lose money for Japanese investors.
That’s not fear — that’s math.
Capital comes home.
Even a few hundred billion dollars returning isn’t “orderly” — it creates a liquidity vacuum.
Then comes the real detonator: the yen carry trade
Over $1 TRILLION borrowed cheaply in yen and deployed into:
→ Stocks
→ Crypto
→ Emerging markets
As Japanese rates rise and the yen strengthens:
→ Carry trades unwind
→ Margin calls hit
→ Forced selling starts
→ Correlations go to ONE
Everything sells. Together.
Meanwhile…
U.S.–Japan yield spreads tighten
Japan has less reason to fund U.S. deficits
U.S. borrowing costs rise
And the BoJ might not be finished.
Another hike?
→ Yen spikes
→ Carry trades explode harder
→ Risk assets feel it immediately
Japan can’t just print money anymore.
Inflation is already elevated:
Print → Yen weakens → Imports surge → Domestic pressure spikes

dawos 2026