JAPAN’S BOND MARKET: A WARNING FOR GLOBAL MARKET | 250% Debt bomb

JAPAN’S BOND MARKET: A WARNING FOR GLOBAL MARKET | 250% Debt bomb

Now, Japan’s been a country that enjoyed nearly a 0% interest rate for decades, which allowed a massive cash flow at virtually no cost. But now, it’s changing because Japanese government bonds yields are skyrocketing. A 10-year yield just hit 1.59%, which is highest since 2008 financial crisis. What is even more concerning, the longer maturities are even under greater stress. A 20-year-old yield has climbed above 2.6% and a 30-year has touched an all-time high of 3.2%. Now before we get into the details, don’t forget to hit that subscribe button. So let’s start with the basics. So when you buy a government bond, you’re lending money to the government in exchange for regular interest payments and the full payment will be provided at a future date which is called maturity. Now yield is effectively a return on investment and it moves inversely to the bond’s price. So when an investor sells bond, prices fall and the yields go up because the future payments now represent a better return relative to the lower price. So, if the yields are up, the price is going to be down and the market’s going to be in panic. So, you would wonder why Japanese investors are dumping their bonds because they’re losing faith in Japan’s ability to pay its massive debt without triggering inflation or the growth. Right now, Japan’s debt to GDP ratio is about 250%, which is highest among any developed country in the world. Even Greece during its debt crisis wasn’t this deep in the red. Japan right now is an uncharted territory, a situation no country has ever faced before. And to make things even worse, inflation came in at 3.5% in June and it has stayed above 2% for the past 3 years. This erodess investment value because you’re earning the same return, but the prices keep on rising. So what do investors do? They demand higher yields or they will sell the bond. So now Japan’s ministry of finance is also scaling back issuance of super long bonds and the Bank of Japan is reducing its bond purchases which will allow the market to function on its own. So what will happen? The bond prices will collapse and the yield’s going to sore. Well, I mean it doesn’t look like Japan has much of an option left here because either they go for tax cuts or if they’re going to increase spending, they don’t have much of an option here. So it’s not going to be a painless exit at this point in time. Well, I hope you like the video. Don’t forget to subscribe for more updates like this.

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In this video, I have explained the current crisis unfolding in Japan’s bond market. Yields are surging, inflation is rising, and investor confidence is shaking as Japan faces record-high debt levels. I break down what’s causing the chaos, how it impacts global markets, and what it could mean for the future of Japan’s economy. Don’t forget to like, comment, and subscribe for more updates!

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