Rising interest rates are setting the stage for several crises around the world. This segment of What’s Ahead lays out why there’s a really big one brewing with the Japanese yen.


For years Japan has been defying economic laws of gravity: a stagnant economy, government spending and taxes at levels that would make Joe Biden drool, a national debt normally associated with deadbeat governments, and almost nonexistent interest rates.

But the reckoning is coming. Surging U.S. interest rates are cratering the yen as traders buy dollars and dump the yen. In Japan the sacred benchmark for years has been the 0.25% ceiling on the ten-year bond. The Bank of Japan (BOJ) and the country’s dominant financial institutions are loaded with these bonds and other unrealistically priced government paper. To prevent a breach of that ceiling, the BOJ has been binge-buying bonds by creating money out of thin air—which will trigger an inflationary crisis.

Japan is the world’s third-largest economy. This crisis will have international repercussions.


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