Japan Bond Market Squeeze Threatens Stocks and Crypto Rally

Japan's bond market is experiencing stress as the 10-year yield has reached its highest level since October 1996, at 2.825%. This surge in yields threatens the easy money that fueled multi-year rallies in stocks and Bitcoin (BTC).

The Japanese yen trades near 162 per dollar, its weakest level since 1986, despite Tokyo's record intervention to defend it this spring.

Prime Minister Sanae Takaichi's government plans to mobilize over ¥370 trillion ($2.28 billion) in public and private investment across 17 strategic sectors through fiscal 2040, implying heavier bond issuance ahead.

The Bank of Japan is trimming its bond purchases, and policymakers may pause the taper only from fiscal 2027. This reduction in demand combined with more supply and a smaller BOJ bid means yields get pushed higher mechanically, not just sentimentally, according to macro analyst Bull Theory.