The Treasury Secretary just told you what actually happened.
“Markets are going down because Japan’s bond market just suffered a six-standard-deviation move in ten-year bonds over the past two days. This has nothing to do with Greenland.”
Scott Bessent then called Tokyo.
Not Brussels. Not the EU. Tokyo.
Here’s what triggered it:
Sunday night, PM Takaichi announced a snap election for February 8 and promised to cut the food sales tax to zero. No plan to cover the lost revenue.
Bond markets delivered their verdict in hours.
- 10Y JGB yield: 2.38%. Highest since 1999. - 20Y JGB yield: +22bps in a single session. - 40Y JGB yield: 4.21%. All-time record since its 2007 debut.
Then the transmission fired.
Japan holds $1.2 trillion in US Treasuries. More than any nation on Earth.
When Japanese yields spike, capital repatriates. To repatriate, they sell American assets. Stocks. Bonds. Everything.
$1.3 trillion erased from US markets in one session.
This is not new. This is a pattern.
August 5, 2024. Same mechanism. BOJ hiked rates. Carry trade unwound. Nasdaq dropped 3.4% in a day. Bitcoin fell 17% in hours. JPMorgan estimated 50-65% of global carry positions liquidated.
That was wave one.
This is wave two.
The difference: August 2024 was monetary. A rate hike.
January 2026 is fiscal. Unfunded tax cuts from a Prime Minister facing election.
Fiscal shocks are harder to reverse.
What happens next:
Bank of Japan meets this week. If they announce emergency bond purchases, temporary stabilization. If they stay silent, yields keep climbing.
The Treasury Secretary already knows which scenario is more likely.
That’s why he made the call before markets opened.
Watch these levels:
- 10Y JGB above 2.5% triggers potential BOJ intervention.
