⚠️Japanese bond yields are EXPLODING HIGHER Japan’s 10-year JGB yield is nearing 3%, a level not seen since 1996, as investors demand more compensation for rising fiscal risks and the prospect of higher-for-longer rates. At the same time, the 30-year JGB yield is near its highest level since the bond was introduced in 1999, while the 40-year yield is also near its highest level since its 2007 debut. Meanwhile, Japan’s government debt exceeds 200% of GDP, making every further increase in borrowing costs more painful for the fiscal position. Japanese insurers are also exposed, facing RECORD losses on bonds purchased during the ultra-low-rate era as yields surge higher. At the same time, higher domestic yields raise the odds of Japanese capital flowing back home, putting pressure on massive overseas bond and carry trades built around cheap Yen funding. The spillover risk is significant: as JGB yields rise, Japanese investors may sell US Treasuries, pushing Treasury yields higher, while unwinding Yen-funded carry trades could pressure US equities and other risk assets. Japan’s bond market could be the next global shock.