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Is the long-awaited implosion of the Japanese financial system beginning? Japanese bond yields are spiking dramatically, Japan’s debt to GDP ratio is now above 230 percent, the Japanese economy has started contracting, and Japanese Prime Minister Shigeru Ishiba just publicly stated that the financial condition of his nation is worse than the financial condition of Greece. When I heard that he had said this, I knew that I had to find his direct quote <www.independent.co.uk/asia/japan/japan-financial-crisis-greece-shigeru-ishiba-tax-cuts-b2753693.html> and share it with all of you…
*“It’s important to recognise the dangers of a society and a world with interest rates. The government is not in a position to comment on interest rates, but the reality is we are facing a world with them. Our country’s fiscal situation is undoubtedly extremely poor, worse than Greece’s,” the prime minister told the parliament on Monday.*
That is really an extreme thing to say.
But it is accurate. Greece has a debt to GDP ratio of 142.2 percent <www.independent.co.uk/asia/japan/japan-financial-crisis-greece-shigeru-ishiba-tax-cuts-b2753693.html> while Japan has a debt to GDP ratio of 234.9 percent <www.independent.co.uk/asia/japan/japan-financial-crisis-greece-shigeru-ishiba-tax-cuts-b2753693.html> …
*According to the International Monetary Fund, Japan’s general government debt as a percentage of gross domestic product stood at 234.9 per cent as of 2025 while it was at 142.2 per cent for Greece.*
This is a crisis that has been building for a long time, but now it appears that we have reached a tipping point.
Since the beginning of April, Japanese bond yields have been going completely nuts <wolfstreet.com/2025/05/20/japans-30-year-and-40-year-bonds-crater-yields-spike-huge-mess-coming-home-to-roost-yen-carry-trade-at-risk/> …
*Japan, which now has substantially more inflation than the US – 3.6% overall CPI and 3.2% core CPI – is watching in astonishment as its very-long-term bond yields spike in a dramatic manner, while the Bank of Japan has accelerated QT this year, which it started in mid-2024.*
*The superhero is the 40-year JGB yield, which jumped another 11 basis points at the moment, for a spike of 100 basis points since the beginning of April, to 3.56% at the moment. A rising yield means a falling price.*
Major financial institutions all over the globe are now facing gigantic unrealized losses on their Japanese bond holdings.
Meanwhile, Japan’s economy has now fallen into contraction mode <www.cnbc.com/2025/05/16/japan-economy-gdp-contracts-more-than-expected-0point2percent-from-prior-three-months.html> …
*Japan’s economy shrank for the first time in a year, contracting 0.2% in the March quarter as exports declined sharply, preliminary government data showed Friday.*
*The gross domestic product data was poorer compared to the 0.1% contraction expected by economists polled by Reuters.*
*On an annualized basis, Japan’s GDP contracted 0.7% in the first quarter, also more than the 0.2% fall expected in the Reuters poll.*
Japan’s economy is expected to keep shrinking in the second quarter due to the pressure that the global trade war is putting on it.
But Prime Minister Ishiba is insisting <www.asiafinancial.com/japan-tells-us-no-trade-deal-unless-auto-tariffs-scrapped-ys> that Japan will not rush into a bad trade deal with the United States…
*Prime Minister Shigeru Ishiba spoke to reporters after being briefed by economic revitalisation minister Ryosei Akazawa on the second round of talks in the US.*
*“There is still a wide gulf between [Japan’s and the United States’] positions and no common ground has emerged,” he was quoted as saying.*
*“We are [pushing to negotiate] all the tariffs, including those on automobiles, steel and aluminium,” Ishiba said, adding that new duties on auto parts were “extremely regrettable” and Japan would “continue to demand that they be reversed.”*
The 25 percent automotive tariffs are hitting Japan really hard, and the Japanese want them to be removed.
But U.S. officials have clearly stated that the Japanese will not be getting any special treatment <www.asiafinancial.com/japan-tells-us-no-trade-deal-unless-auto-tariffs-scrapped-ys> …
*The 25% automotive duty has been applied to every country, and Washington has said it will not grant Japan any special treatment.*
*But Tokyo has said autos are the country’s core industry and carmakers have an extensive supply chain for parts makers. If the tariffs remain it “could cause the entire Japanese economy to stall,” the report said.*
At this stage, I would not expect to see a trade deal between the U.S. and Japan any time soon.
With elections looming in July, Prime Minister Ishiba simply cannot afford to look weak right now <asiatimes.com/2025/05/japan-not-rushing-into-a-bad-trade-deal-with-trump/> …
*Unlike the UK, Japan is in no hurry to reach a disadvantageous or incomplete trade deal with US President Donald Trump, particularly with elections to the upper house of Japan’s national assembly coming up in July. And unlike the South Koreans, the Japanese are not seeking a low-key compromise.*
*The impact of 25% tariffs on autos and auto parts on the Japanese economy is simply too great, and America’s renewed assault on Japan’s rice farmers is too sensitive to tolerate.*
*Ishiba already leads a minority government, his Liberal Democratic Party having lost its majority in the lower house last October. Now he must either stand up for Japan or risk losing the party’s majority in the upper house as well.*
In 2008 and 2009, the U.S. experienced a major financial crisis and a major recession simultaneously.
It appears that Japan could be headed for the same fate.
Of course the U.S. economy is not faring very well at the moment either.
In fact, we just learned that the Conference Board’s index of leading economic indicators has now fallen for five months in a row <www.msn.com/en-us/money/markets/us-economic-outlook-darkens-as-major-forecast-records-steep-drop/ar-AA1F8EpZ?ocid=hpmsn&cvid=4eaae57e16f6474484ae0473bc5573b2&ei=86> …
*The short-term outlook for the U.S. economy worsened significantly in April, according to the Conference Board’s latest Leading Economic Index (LEI).*
*On Monday, the D.C.-based research said that the index—a closely monitored composite of several economic indicators—had fallen by 1.0 percent to 99.4 in April, registering the fifth consecutive monthly decline and the steepest drop since March 2023. Over the six months ending in April 2025, the LEI fell by two percent, matching the pace of decline posted over the previous six months.*
Even if a global trade war had not erupted, it was clear that a worldwide economic slowdown was coming in 2025.
But now the trade war threatens to transform that slowdown into something much worse.
Is the long-awaited implosion of the Japanese financial system beginning? Japanese bond yields are spiking dramatically, Japan’s debt to GDP ratio is now above 230 percent, the Japanese economy has started contracting, and Japanese Prime Minister Shigeru Ishiba just publicly stated that the financial condition of his nation is worse than the financial condition of Greece. When I heard that he had said this, I knew that I had to find his direct quote <www.independent.co.uk/asia/japan/japan-financial-crisis-greece-shigeru-ishiba-tax-cuts-b2753693.html> and share it with all of you…
*“It’s important to recognise the dangers of a society and a world with interest rates. The government is not in a position to comment on interest rates, but the reality is we are facing a world with them. Our country’s fiscal situation is undoubtedly extremely poor, worse than Greece’s,” the prime minister told the parliament on Monday.*
That is really an extreme thing to say.
But it is accurate. Greece has a debt to GDP ratio of 142.2 percent <www.independent.co.uk/asia/japan/japan-financial-crisis-greece-shigeru-ishiba-tax-cuts-b2753693.html> while Japan has a debt to GDP ratio of 234.9 percent <www.independent.co.uk/asia/japan/japan-financial-crisis-greece-shigeru-ishiba-tax-cuts-b2753693.html> …
*According to the International Monetary Fund, Japan’s general government debt as a percentage of gross domestic product stood at 234.9 per cent as of 2025 while it was at 142.2 per cent for Greece.*
This is a crisis that has been building for a long time, but now it appears that we have reached a tipping point.
Since the beginning of April, Japanese bond yields have been going completely nuts <wolfstreet.com/2025/05/20/japans-30-year-and-40-year-bonds-crater-yields-spike-huge-mess-coming-home-to-roost-yen-carry-trade-at-risk/> …
*Japan, which now has substantially more inflation than the US – 3.6% overall CPI and 3.2% core CPI – is watching in astonishment as its very-long-term bond yields spike in a dramatic manner, while the Bank of Japan has accelerated QT this year, which it started in mid-2024.*
*The superhero is the 40-year JGB yield, which jumped another 11 basis points at the moment, for a spike of 100 basis points since the beginning of April, to 3.56% at the moment. A rising yield means a falling price.*
Major financial institutions all over the globe are now facing gigantic unrealized losses on their Japanese bond holdings.
Meanwhile, Japan’s economy has now fallen into contraction mode <www.cnbc.com/2025/05/16/japan-economy-gdp-contracts-more-than-expected-0point2percent-from-prior-three-months.html> …
*Japan’s economy shrank for the first time in a year, contracting 0.2% in the March quarter as exports declined sharply, preliminary government data showed Friday.*
*The gross domestic product data was poorer compared to the 0.1% contraction expected by economists polled by Reuters.*
*On an annualized basis, Japan’s GDP contracted 0.7% in the first quarter, also more than the 0.2% fall expected in the Reuters poll.*
Japan’s economy is expected to keep shrinking in the second quarter due to the pressure that the global trade war is putting on it.
But Prime Minister Ishiba is insisting <www.asiafinancial.com/japan-tells-us-no-trade-deal-unless-auto-tariffs-scrapped-ys> that Japan will not rush into a bad trade deal with the United States…
*Prime Minister Shigeru Ishiba spoke to reporters after being briefed by economic revitalisation minister Ryosei Akazawa on the second round of talks in the US.*
*“There is still a wide gulf between [Japan’s and the United States’] positions and no common ground has emerged,” he was quoted as saying.*
*“We are [pushing to negotiate] all the tariffs, including those on automobiles, steel and aluminium,” Ishiba said, adding that new duties on auto parts were “extremely regrettable” and Japan would “continue to demand that they be reversed.”*
The 25 percent automotive tariffs are hitting Japan really hard, and the Japanese want them to be removed.
But U.S. officials have clearly stated that the Japanese will not be getting any special treatment <www.asiafinancial.com/japan-tells-us-no-trade-deal-unless-auto-tariffs-scrapped-ys> …
*The 25% automotive duty has been applied to every country, and Washington has said it will not grant Japan any special treatment.*
*But Tokyo has said autos are the country’s core industry and carmakers have an extensive supply chain for parts makers. If the tariffs remain it “could cause the entire Japanese economy to stall,” the report said.*
At this stage, I would not expect to see a trade deal between the U.S. and Japan any time soon.
With elections looming in July, Prime Minister Ishiba simply cannot afford to look weak right now <asiatimes.com/2025/05/japan-not-rushing-into-a-bad-trade-deal-with-trump/> …
*Unlike the UK, Japan is in no hurry to reach a disadvantageous or incomplete trade deal with US President Donald Trump, particularly with elections to the upper house of Japan’s national assembly coming up in July. And unlike the South Koreans, the Japanese are not seeking a low-key compromise.*
*The impact of 25% tariffs on autos and auto parts on the Japanese economy is simply too great, and America’s renewed assault on Japan’s rice farmers is too sensitive to tolerate.*
*Ishiba already leads a minority government, his Liberal Democratic Party having lost its majority in the lower house last October. Now he must either stand up for Japan or risk losing the party’s majority in the upper house as well.*
In 2008 and 2009, the U.S. experienced a major financial crisis and a major recession simultaneously.
It appears that Japan could be headed for the same fate.
Of course the U.S. economy is not faring very well at the moment either.
In fact, we just learned that the Conference Board’s index of leading economic indicators has now fallen for five months in a row <www.msn.com/en-us/money/markets/us-economic-outlook-darkens-as-major-forecast-records-steep-drop/ar-AA1F8EpZ?ocid=hpmsn&cvid=4eaae57e16f6474484ae0473bc5573b2&ei=86> …
*The short-term outlook for the U.S. economy worsened significantly in April, according to the Conference Board’s latest Leading Economic Index (LEI).*
*On Monday, the D.C.-based research said that the index—a closely monitored composite of several economic indicators—had fallen by 1.0 percent to 99.4 in April, registering the fifth consecutive monthly decline and the steepest drop since March 2023. Over the six months ending in April 2025, the LEI fell by two percent, matching the pace of decline posted over the previous six months.*
Even if a global trade war had not erupted, it was clear that a worldwide economic slowdown was coming in 2025.
But now the trade war threatens to transform that slowdown into something much worse.
GO HERE FOR MORE michaeltsnyder.substack.com/p/is-japans-financial-system-on-the?publication_id=1520363&post_id=164035947&isFreemail=true&r=1ovjep&triedRedirect=true
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