Could Japan’s Fiscal Woes Spread to US Treasury Markets? | Presented by CME Group

Summary

The video examines Japan’s fiscal situation under Prime Minister Takaichi, whose stimulus package has pushed 40-year JGB yields higher and weakened the yen to 159 per dollar. It highlights a January 23 US Treasury/Bank of Japan rate check that lifted the yen 4% without direct intervention. The main market risk is that Japan’s $1.2 trillion of US Treasury holdings could be sold if its fiscal troubles escalate, spreading stress to US bond markets.

• Japan’s new PM Takaichi announced a robust stimulus package in October 2025.
• 40-year Japanese government bond yields rose from 3.37% to 4.21% by January 20.
• The yen fell to 159 per dollar, a 35% drop over five years.
• A US Treasury/BOJ rate check on January 23 pushed the yen 4% higher without intervention.
• Japan holds $1.2 trillion of US Treasury bonds.
• A Japanese fiscal shock could force quick UST sales, spreading stress to US markets.
• Japan’s fiscal issues are not expected to disappear soon.