Why Japan Could Trigger the Next Global Financial Crisis!

Why Japan Could Trigger the Next Global Financial Crisis!

Global markets are falling again, and the main reason this time is Japan, not the US. It may sound surprising, but Japan could be at the center of the next financial crisis, and here’s why.

For almost 20 to 25 years, Japan kept interest rates at 0 percent. This made borrowing extremely cheap. So the Japanese government borrowed money and invested heavily in global bonds, especially US Treasuries. Big global institutions did the same and invested in stocks and even crypto because the borrowing cost was almost nothing.

But now the story has flipped.

Japan’s 20-year bond yield has jumped to 2.75 percent, the highest since 1999. With rising rates, all the old calculations break. Japan has 10 trillion dollars of debt and 3.2 trillion dollars of investments, out of which 1.2 trillion is in US Treasuries. If rates keep rising, Japan might be forced to sell these US bonds to manage interest payments — and that could push US rates up even more.

On top of that, global institutions that borrowed cheap yen and invested in equity and crypto may also unwind their positions, creating selling pressure everywhere.

And if the yen strengthens while rates rise, their cost shoots up even further.

This combination is exactly why markets across the world are nervous right now.

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