The cheapest money in the world just got more expensive.
The entire global financial system borrowed it.Japan's 10-year bond yield just hit 2.564%, for the first time this century. Japan is one of the largest holders of U.S. Treasury bonds in the world.
As Japanese yields rise and a BOJ rate hike gets closer, Japanese investors have less reason to keep buying U.S. debt. If they start selling, U.S. borrowing costs go up for everyone.
Japan's government debt-to-GDP ratio exceeds 200%, the highest of any developed economy on earth.
Rising yields mean rising borrowing costs on that entire debt pile, pushing Japan closer to a fiscal crisis.
The BOJ has already raised its inflation outlook to 2.8% for 2026. But a hike is now being priced in as early as the next meeting.
If Japan's economy comes under serious pressure, it will not stay contained.
The U.S. financial system is directly exposed.