Japan spent decades trapped in nothing works territory with weak demand, falling prices, and rates pinned near zero. The BOJ became the market..not just a participant because that was the only way to keep the system from sliding back into a deflationary mindset.

Now they’re trying to exit that world without snapping the plumbing. Let yields move, let banks earn a curve, restore some honest price discovery… and, quietly, rebuild wiggle room so the next downturn isn’t fought from zero again. That’s the uncomfortable part people miss..you normalize when you can, because when the next Minsky moment arrives, you won’t get to choose the timing.

But the trade off is brutal. When the 40 year is printing 4% while the 10 year is up around 2.35%, that’s not a little normalization. That’s the market demanding real compensation for duration and reminding everyone how sensitive a high debt system is to long rates.

If U.S. and Japan yields rise together it becomes a global tightening event even without any central bank hiking.

When the two biggest safe bond markets both reprice higher at the same time..

• The world’s discount rate resets upward (everything gets valued against it).

• Leverage gets more expensive and less forgiving.

• The yen carry trade starts to cough, and that’s often where stress shows up first.

• Japanese capital has less reason to live overseas, which can mean less marginal demand for Treasuries right when the U.S. is issuing a lot.

Historically, synchronized long rate climbs don’t just go on forever. They usually end one of two ways..

1. Something breaks and you get a real flight to safety, or
2. Policy steps back in..directly or indirectly to put a ceiling on the long end.

Until one of those happens, rising yields together is basically the market saying that the cost of money is going up everywhere, and somebody levered is going to feel it.