Bloomberg Daybreak: Asia Edition Markets Slump as Greenland, Japan Fears Shake Up Torpid Trading
Jan 21, 2026
In this discussion, Paul Dobson, Executive Editor for Asia Markets, tackles the volatility in Japanese bonds and the implications of rising yields on the carry trade and market stability. Christopher Smart, Managing Partner at Arbroath Group, analyzes the fallout from President Trump's Greenland remarks, highlighting how it could undermine US trustworthiness and affect transatlantic alliances. Both guests provide insights into how geopolitical factors and fiscal dynamics are influencing market sentiment and trading strategies across Asia.
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Japan's Low-Yield Era Is Reversing
- Japan's long-term low-yield era is ending as inflation and rate increases push yields higher, especially at the back end of the curve.
- That rise, combined with concerns over large public debt and unfunded spending, triggered a rare, sharp sell-off in long-term JGBs.
Debt And Election Spending Spooked Markets
- Japan's large debt-to-GDP ratio and prospective unfunded election spending amplified market fears and likened the move to the UK's gilt shock.
- That combination caused an unusual 25 basis point jump in long-term yields and heightened investor wariness.
Carry Trade At Risk, But Not Dead Yet
- Rising JGB yields could weaken the global carry trade if Japanese investors prefer domestic returns over overseas investments.
- But short-term borrowing costs in Japan remain low, so the carry dynamic has continued for now and the yen stays weak around 160.