Japan has just triggered the biggest shift in global liquidity in the past decade.

Let me explain why it matters:

The yield on 10-year Japanese government bonds has risen to 1.71%, the highest level since 2008.

For an economy that has lived with near-zero interest rates for 30 years, this move completely changes capital flows across global markets.

🇯🇵 Why does Japan matter?

For three decades, Japan has been the silent engine of global liquidity:

• extremely low interest rates,

• a cheap yen,

• investors borrowing in yen and buying higher-yielding assets in the US, Europe, and emerging markets,

• Japanese pension funds buying massive amounts of US Treasuries.

This system kept global financing costs low and fueled bull markets everywhere.

🛑 But something broke in 2025

As Japanese yields rise:

• US bonds become less attractive to Japanese investors,

• hedging costs for the yen have increased,

• and some major Japanese buyers are reducing exposure to US debt.

This doesn’t mean liquidity disappears, but flows are reversing — and this is one of the most important shifts in the global interest-rate landscape.

What’s the risk?

If Japanese investors continue reducing their foreign bond holdings:

• US yields could rise,

• mortgage and corporate borrowing costs may increase,

• interest-rate-sensitive assets could come under pressure,

• and strategies built on the “yen carry trade” may face adjustments.

This is not a “collapse,” but a global repositioning of capital after a 30-year cycle.

📅 The critical moment: December 18

At the next meeting, the Bank of Japan may once again decide on interest rates.

Another move would reinforce the current trend and accelerate the reconfiguration of international capital flows.

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Conclusion

We are not witnessing the end of the financial world — but the end of an era:

the era of zero interest rates in Japan, which fueled global liquidity for three decades.

Investors should watch closely:

• Japanese yields,

• capital flows from Japanese pension funds,