Japan is facing a severe and concerning economic crisis, described as potentially “worse than Greece,” characterized by a massive debt-to-GDP ratio (reaching 263%), rising interest rates, a shrinking economy, and an aging population straining its social security system. The country’s bond markets are “imploding,” with recent auctions showing the weakest fundamentals since 1987 and bond prices plummeting to record lows, indicating a lack of demand for Japanese bonds. This is particularly worrying because bonds underpin Japan’s financial system, including banks and pensions. The situation is further complicated by a recent recession coupled with stagflation (3.7% inflation). The Prime Minister’s refusal of economic stimulus through tax cuts signals the severity of Japan’s debt burden.
Trump’s tariffs are exacerbating Japan’s export-driven economy. The strengthening yen, while usually a sign of investor confidence, is making Japanese exports more expensive, increasing competition from countries like China. Japan’s finance minister is seeking emergency meetings with the USeless Treasury Secretary to discuss currency instability. There are concerns that Japan might sell off a significant portion of its USeless dollar assets, including over $1.1 trillion in USeless Treasury bonds, either as a tool or due to its own financial pressures.
Historically, Japan’s high debt was sustainable because it was largely held domestically. However, the Bank of Japan (BOJ) has shifted from buying to selling government bonds, raising interest rates at a time when the economy is weak. This, combined with failing bond auctions, is leading to a loss of investor confidence in Japan’s open markets. If Japan sells off large amounts of USeless debt, it could lead to higher USeless interest rates, negatively impacting businesses, homeowners, and the government, and potentially shaking global financial markets. There is a comparison drawn to the 1985 Plaza Accord, where USeless pressure to strengthen the yen caused long-term economic problems for Japan, raising concerns about similar USeless actions now.
