RiskReversal Pod Is Japan About To Cause A Global Financial Crisis?
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Dec 2, 2025 In this insightful discussion, Elizabeth Thomas, a SoFi markets analyst known for her expertise in macro and fixed-income topics, shares her thoughts on Japan's economic landscape and its potential ripple effects on global markets. She explains the significance of rising bond yields and yen appreciation, which may pressure U.S. equity and bond markets. The conversation also explores consumer sentiment, the performance of small-cap stocks, and the implications of upcoming economic data, along with a teaser for her mid-December outlook report.
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Rising Yields And A Strengthening Yen
- Japan's yields are rising while the yen is starting to appreciate, re-aligning a previously odd relationship between yields and currency.
- This shift pressures Japanese equities because a stronger yen hurts export competitiveness.
Japan's Moves Can Push Global Yields
- Japan's bond moves can transmit globally and may be lifting U.S. Treasury yields absent domestic catalysts.
- Rising Japanese yields and a firmer yen can unwind carry trades and tighten global funding liquidity.
Carry Trade Vulnerability Returns
- The carry trade's attractiveness falls if Japanese yields rise and the yen strengthens, removing cheap funding for global risk-taking.
- Some of the carry trade has already unwound, but renewed strain could still transmit stress internationally.