As we warned last November, the Japanese “stimulus” program could potentially rock the boat of the global financial system, by pushing Japanese rates up and thus curbing the carry trade that has kept a good chunk of U.S. bonds alive.
The government of Sanae Takaichi, shortly after the new prime minister’s taking office on Oct. 21, 2025, announced such a stimulus program; and then on Jan. 26, 2026 called for snap elections, to secure voters’ support to its program. This sent Japan bond yields up—including an unheard-of quarter-point jump in one day—and, as a consequence, sent bond yields up worldwide, with other such effects as a 900-point drop in the Dow Jones average on Dec. 20, 2025. The global financial system, burdened by a multi-quadrillion financial bubble, which is already cracking, can hardly bear such shocks.
