Japan’s Long-Bond Yield Spike Sends Warning Signals to Global Markets
A sharp rise in Japan’s long-term government bond yields is stirring concerns among global investors, with analysts warning that the spike could signal trouble ahead for risk assets like equities and cryptocurrencies.
Over the past several days, yields on Japan’s 30-year bonds have jumped over 30 basis points, breaching the 3% level for the first time since late May, where they peaked at 3.20%, according to TradingView. The 40-year bond yield also surged, climbing nearly 15 basis points to 3.36%.
The sudden move reflects investor concerns about the country’s fiscal trajectory heading into upcoming elections. Prime Minister Shigeru Ishiba is defending a proposal for direct cash payouts, while opposition parties are calling for sweeping tax cuts—raising fears of larger deficits ahead.
The situation is further complicated by new U.S. tariffs. President Donald Trump recently announced a 25% levy on Japanese imports, adding external pressure to an already fragile domestic outlook.
Bond Market Volatility May Spill Over
Japan’s bond market, long considered a source of global rate stability, is now becoming a source of volatility. Rising yields in the world’s third-largest economy may spill into other developed markets, leading to higher borrowing costs globally and dampening appetite for risk-on assets.
For crypto markets, this bond market turbulence is particularly relevant. Traders are watching the MOVE index—a key measure of volatility in U.S. Treasurys—which often has an inverse relationship with bitcoin. Historically, peaks in bitcoin have coincided with lows in bond volatility, and rising yields could be a signal that risk sentiment is shifting.
Upcoming 20-Year Auction in Focus
All eyes are now on Thursday’s scheduled 20-year Japanese government bond auction. These auctions have a track record of shaky demand, and a weak showing could trigger further volatility in long-term yields, adding pressure across asset classes.
The End of an Ultra-Low Rate Era?
Japan’s ultra-low interest rate regime—once a global anchor—appears to be fading. Since 2023, the Bank of Japan has been gradually tightening policy after decades of easy money. That shift is now reverberating through the global bond landscape, contributing to higher yields and a more cautious tone in financial markets.
