🚨 JAPAN'S BOND AND CURRENCY CRISIS IS ABOUT TO GET WORSE Japan's 2 year bond yield just hit a new 31 year high at 1.71%, and USDJPY is climbing back toward 160. The pressure is coming from inflation that keeps building. Producer prices rose 7.2% year over year in July, the highest in almost 3.5 years, and Tokyo core inflation has now accelerated for three straight months. Two forces are keeping that inflation alive. The Strait of Hormuz closure is keeping oil prices elevated, and a weak yen is making everything Japan imports more expensive. That is pushing the BOJ toward a rate hike as soon as September, with more hikes likely to follow. But higher rates create a second problem. Japan already carries one of the highest debt to GDP ratios in the world, so every hike makes that debt sharply more expensive to service. And there is no easy way to grow out of it. Japan's labor force is also shrinking as its birth rate falls, cutting into the country's long term growth right as its borrowing costs rise.