Japan Just Pulled the Pin as Global Debt Bomb is About to Explode

Japan Just Pulled the Pin as Global Debt Bomb is About to Explode

You may not realize it yet, but something just happened that directly threatens not only the value of your dollars, but the future of the US economy. And it all starts in Japan. The largest foreign holder of US debt is facing a bond market meltdown. Japan’s long-term bond yields have been surging with their 20 and 30year hitting record highs. A sure sign that something fundamental is snapping. But let me be clear, this is not a Japan-only problem. This is a flashing red warning signal for all of us because what happens there will impact the US dollar, the US stock market, and the stability of the entire financial system. Let me explain. Japan is the most indebted major economy on Earth with a debt to GDP ratio of roughly 250%. meaning that their government owes 2 and a half times of the total value of everything their country produces in a year. For context, the US debt to GDP ratio is 120% which is still appalling. But Japan is truly in a league of their own. Like all governments, Japan funds its mountain of debt by issuing bonds. Bonds which attract investors by offering a yield or an interest rate of return. But Japan is unique. See, for years, they’ve been carrying this massive debt burden, all while keeping yields at near zero. Something that was only possible because the largest buyer of Japan’s debt is its own central bank, the Bank of Japan, who doesn’t care about yields and carries the majority of bonds on its balance sheet. But last week, something changed that rattled not only Japanese traders, but global markets everywhere. Japan’s new prime minister, Sai Takaii, signaled that Japan was gearing up to issue a massive stimulus package at a time when inflation is already rising and the yen is already weak. This makes the financial situation in Japan look very precarious. And to fund all of that extra spending, Japan is going to have to unleash a new wave of long-term bonds. As more supply hits the market, well, investors are going to demand higher yield or to be compensated more to carry that additional risk. This speculation is what’s driving these record high yields. In fact, traders have literally dubbed it the Tekkai trade. A bet that yields will continue to rise even above the level today as more bonds are issued and their debt situation gets messier and messier. This leaves the Bank of Japan trapped. See, if they print more yen to buy their own bonds and cap yields, they risk crashing the currency. But if they step back and let yields continue to rise, well, when you have 250% debt to GDP ratio, even a small rise in yields or the cost to borrow money is going to tip you into a state of crisis. No central bank, no nation or currency has survived this level of debt for long without an outright default or hyperinflation. But here’s how all of this impacts you directly. Japan is the largest foreign holder of US treasuries, sitting at about $1.2 trillion. In fact, over the last nine months, they have continued to increase their holdings at a time when foreign nations are actively ditching the dollar. They were willing to keep buying our debt because Japanese bonds paid practically nothing. But now that’s changing. As yields or the interest paid on these bonds continued to rise and you factor in the cost of hedging the currency, a common practice, the math no longer makes sense for Japanese investors in US markets. You’re going to see insurers, pensions, Japanese banks all repatriating or bringing their funds back home. As you see this flood of capital leaving the US Treasury market, well, this is going to have a direct impact on the financing costs of US debt at a time when the United States really can’t afford less demand for our debt. As it stands today, the interest alone on US debt is over a trillion dollars a year. To put that into perspective, that is more than the US pays on its entire defense budget annually. But it doesn’t just stop there. Rising Japanese yields not only impacts funds moving out of US treasuries, but it also threatens to unwind one of the largest invisible global financial trades, the yen carry trade. The yen carry trade is basically an interest arbitrage play. borrow cheaply in yen thanks to those near zero interest rates historically and then invest it abroad in something that pays more such as US treasuries, corporate bonds, real estate, crypto, the US stock market, you name it. It’s all tied up in the yen carry trade. Borrow long in yen, earn a higher interest rate elsewhere. Pocket the difference. It’s a great trade as long as two things remain steady. number one that rates remain near zero and number two that the yen remains weak. But if either of these start to change like yields rising, well then suddenly the whole thing starts to crack. These are highly leveraged positions. And if borrowing costs of yen are too great and the math doesn’t work out, well, suddenly you’re going to have a violent sell-off. All of these traders and investors are going to be unwinding their position all at once, which is why you could see a market meltdown that seemingly comes out of nowhere. And we’re not talking about some niche strategy or small investment. When you step back and look at globally the amount that is tied to the yen carry trade, including derivatives, we could be looking at tens of trillions of dollars in global finance that are all connected to this trade. When this starts to blow up, it doesn’t stay contained in Japan. It will ripple through the global economy, including the US, the US bond market, the stock market, your retirement. In fact, we already got a taste of just how quickly this could happen in August of last year. Last year in 2024, the yen started to strengthen that other component or piece of the puzzle that has to stay in place for the carry trade to work. And almost immediately the ripple effect was felt in the US as these positions were unwound. Tech stocks suffered. Wall Street was saying it might be a black Monday. No one knew what was going on at first because again it seemingly came out of nowhere. No one was prepared. Now after a few days everything settled down, but it was a good reminder to people of just how quickly things can change. Not only that, we got lucky and next time we might not be so lucky. Especially as this time the changes that are coming are structural and when it impacts the US dollar it is going to impact us all. Higher rates on US treasuries means higher rates on everything from mortgages to credit cards to business loans to car loans. You name it, it’s going to be impacted. Not only that, when you are spending more on interest, on servicing the debt, it leaves less funding room for programs like social security, right? All kinds of things that fixed income retirees depend on. And even if the funding is created for those programs, they’re going to have to fire up the printing press to do so. Meaning that the value of each and every dollar already out there in your savings account, in your retirement, in your checking are going to be reduced. They are going to devalue the dollars that you already have. Meaning that nominally things might stay the same. They might even go up, but ultimately the real value of what you have to protect you into your next chapter of life is going to be at stake. This is an acceleration of the currency reset that is already underway. Now, we have known that intentionally nations are moving away from the dollar. They’re ditching their reserves, their US treasuries, right? But now we have an unintentional move away from the dollar. Our largest foreign buyer of US debt unintentionally might be forced to move away from US assets. This is a huge deal. It’s going to push us faster and farther into this reset. And unfortunately, many people are going to be left unprotected and unprepared for what comes next. Now, what do I mean by that? Many believe that they are diversified, that they are protected, that they have something over here and something over here. But at the end of the day, if you have studied currency resets, you will understand that everything that is tied to the dollar, dollar denominated assets suffer during currency resets. Historically, we can see that time and time again. Stocks, bonds, even real estate, which is a tangible asset, right, can become highly illquid, difficult to sell, or worth significantly less as supply increases. Again, this is something that we have studied here at ITM Trading. If you want to learn more about how different assets perform during currency resets, we do have a completely free resource for you. It is called the Built to Endure Report. You can download your copy by scanning the QR code or there is a download link in the description. Either way, get your copy. It’s completely free. You might as well have it. And once you download it, it is yours to keep forever. Packed with good information, a hundred years of data in there. I highly, highly recommend it if you don’t already have it. And ultimately what we can tell again from history right from research, years and years of research is that there is one asset that will truly protect your wealth on the other side of this reset. Not only just maintain your wealth, but set you up to thrive on the other side, right? An asset that’s going to increase in value, that’s going to increase your purchasing power, unlike the dollar, which will always be worth less than it is today. And that asset is real physical tangible gold. It has been proven time and time and time again. And if you do not already have a strategy that involves physical gold and silver, it is time to get one. And I wish I could tell you exactly what to do. But it is personal for everyone depending on your goals, your needs, your situation, your concerns. Which is why I always tell everyone watching that even if you have a strategy to get a second opinion by calling us at the number below. You can scan the QR code and set up a time that works best for you to talk to one of our expert analysts or you can click the kalanly link in the description below. Whatever is easiest for you. I just really really hope my wish is that for everyone out there watching that you make sure you have your insurance policy in place. And again, what I mean by that is something protected physical outside of the system, outside of dollar control that you know will protect you through this next phase of the reset. If you’re seeing what I’m seeing, then you already know that the time to make sure you’re protected with physical gold and silver is now. And if this was helpful for you in understanding some of these global moves that are happening, please feel free to share with a loved one. Of course, there is strength in numbers and the more people who understand what’s going on, the better. And as always, thank you so much for being here. I’m Taylor Kenny with ITM Trading, your trusted source for all things gold, silver, and lifelong wealth protection. Until next time. [Music]

A quiet crisis in Japan could soon become a full-blown global financial meltdown. The largest foreign holder of U.S. debt is being forced to change course, and the ripple effects could detonate across the global financial system. Why is this crisis is accelerating the global currency reset? —and what you can do to protect yourself before it’s too late.

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📖 CHAPTERS:
0:00 Japan’s Bond Market Blows Up
1:52 World’s Most Indebted Major Economy
3:15 The Takaichi Trade Explained
4:28 BOJ No Win Scenario
5:51 Japan’s Role in U.S. Debt
6:53 The Yen Carry Trade Time Bomb
8:11 Preview of the Meltdown
9:20 Built to Endure

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Disclaimer: The information provided in this video is for educational purposes only and should not be construed as financial advice. Gold and silver prices are influenced by many factors and may fluctuate. All assets carry some risk and past performance does not guarantee future results. The views expressed by our hosts or guests do not always reflect the views of ITM Trading nor guarantee a specific outcome. Always conduct your own research and consult a financial advisor before making any investment decisions.