Japanese Bond Tremors

Discussion – Japanese Bond Tremors Felt Around the World

In the past two months, several notable government bond auctions have taken place in Japan – the land of the rising sun. The Japanese Government has had great difficulty selling new issues, especially the long dated bonds (20 year, 40 year). This has sent chills throughout the global financial markets. Now the UST is feeling the chill with weak bond demand occurring in the US – also for long duration debt.

Why is this happening?

• BOJ owns 52% of all Japanese Bonds (yes, that’s printing money to buy your own debt – QE)
• BOJ is trying to “unwind” its QE by selling its debt holdings as part of attempting to raise interest rates
• But will it work? The unexpected increased interest rates make it harder to repay debt given higher interest expense
• But as these auctions are indicating, no one wants to buy Japanese debt anymore
• Japan is also the #1 owner of US debt, and may need to unwind its stake to address its own problems

Liz Adleta astutely picked up on this through two articles you can read here: 5/21 Early Warning Network and 5/29 Prophecy News Watch. What is interesting is they essentially say the same thing we have been talking about on the New Breed of Business for over 2 years…

“Frankly, the Japanese bond crisis is a preview of what U.S. Treasuries will eventually experience.”  – Early Warning Network, May 21

“A crisis of confidence in U.S. Treasuries would be a crisis of confidence in global stability itself and force a global economic reset… which no one is sure just what that will look like.” – PNW, May 29

Essentially, the world’s central banking and governmental debt is not far from a giant Ponzi-scheme. Central banks have stretched what’s possible by printing funny money to buy their own government’s debt. Japan even lent $1Tn to UST while having borrowed $8Tn themselves. How long can this game of musical chairs last?

“Our country’s fiscal situation is undoubtedly extremely poor, worse than Greece’s” – Prime Minister Shigeru Ishiba

Investors are beginning to reject longer term bonds: PIMCO article

Recent Events worth Noting:

• May 12 – Big Beautiful bill to add $4Tn to debt ceiling and $3.8Tn to deficits
• May 16 – Moody’s downgrades US credit rating to Aa1
• May 20 – Weakest demand since 1987 Japanese 20-year bond auction
• May 20 – JGB 30 year exceeds 3% for first time since inception in 1999
• May 21 – UST 30 year exceed 5% for first time since 2007 pre-financial crisis
• May 28 – Weak demand again for 40 year Japanese bond auction
• June 3 – Dalio publishes book “When Countries Go Broke” early
• June 5 – Elon Musk spat w/President Trump – DOGE $1Tn goal unlikely
• June 6 – LA ICE riots breakout

Japan is the “canary in the global duration coalmine” – Goldman Sachs analysts May 2025

This will be an update to the Watch Japan discussions we have been having since January 2023. It also is a follow-up to our Debt Problem discussions, even our Civil War discussions (recently Ray Dalio has been bringing up his Civil War chapter in the wake of the LA ICE riots and National Guard deployments).

To understand the consequences of this more fully, you can read and listen to all 7 of those prior discussions starting here: Japanese Market Q&A. First Japan, then the US

‘You are going to panic,’ Jamie Dimon tells regulators about what will happen when the bond market cracks

Everyone is watching the two Treasury auctions this week…

The Treasury Department will sell $39 billion of 10-year notes Wednesday, then $22 billion of 30-year bonds Thursday

So, in the midst of any such pending financial quake and trouble, what can we do to prepare? That is what God’s Economy and the Storehouse Vision is all about. In a sentence, we trust Jesus fully (Matt 4:4) and come out of Babylon (Rev 18:4). The sky may not be falling, but take heed, God is not a liar (Daniel, Revelation) and He will not be mocked as we will reap what we have sown (Gal 6:7).

Mentioned on the call…

LA Riots

• 4.5% of total Mexican GDP are remittances
• $65 billion dollars
• Majority are from USA mainly California and Texas
• US threat to tax these payments.

New Growth in the Field, God’s Miraculous Provision

Back to Eden with Matthew & Shepard Lilley

Update

BOJ Plan Reduces Long Bond Issuance