🚨 Japan Just Turned Off the World’s Liquidity Firehose – And the Hangover is Brutal 💀🔥

The 10-year JGB yield closed at 1.721% today – the highest since September 2008. That single number just killed the greatest free-money trade in history.

For 25 years Japan exported deflation: Mrs Watanabe, GPIF, Norinchukin, life insurers – everyone borrowed at 0%, bought US Treasuries, European bonds, EM debt, tech stocks, even Bitcoin. That river of yen kept global asset prices levitated.

That river just reversed direction.

Japanese institutions are no longer net buyers of foreign bonds – they are now the largest net sellers of US Treasuries in 2025. The yen carry trade is detonating in real time. Hedge funds that were 8×–12× levered are getting margin-called and liquidated by the hour. The stronger yen is a meat grinder.

And the domestic pain is even worse: every 10bp rise in yields adds ~¥4 trillion to Tokyo’s annual interest bill. At 1.72% that’s already +¥70 trillion over 10 years – on a debt/GDP ratio already >260%. The BOJ is trapped: hike and the budget explodes, stay pat and the yen explodes. Either way, someone bleeds.

Then the GDP print dropped like a guillotine: −1.8% annualized in Q3, the first contraction in six quarters, smashing the +2.3% from Q2 into oblivion. Private residential investment collapsed, exports cratered, capex plans shelved. The last pillar just cracked.

This is not a “healthy normalization.” This is the moment the greatest liquidity machine in financial history goes into reverse.

What happens next (in order):

1. Yen keeps ripping higher → carry unwind accelerates

2. US 10-year yield breaks 4.8–5.0% as Japanese selling hits → mortgages, corporates, stocks all reprice

3. Emerging markets get crushed (again)

4. BOJ either hikes in December and detonates the budget or blinks and detonates the currency – pick your poison

5. Global risk assets finally feel what real tightening feels like

The world got addicted to Japanese savings. The withdrawal symptoms are just starting.

Position accordingly. 🩸📉

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📝 Disclaimer: This post is for informational purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.

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