Japan's Interest Rate Hike Signal Triggers "Bloodletting" Worries in U.S. Markets, Fed's Rate Cut Prospect May Change

By: theblockbeats.news|2025/12/02 07:45:58
Share
copy

BlockBeats News, December 2nd, as the largest foreign holder of U.S. Treasury bonds, Japan, if it tightens its monetary policy, may trigger domestic funds to flow back from U.S. bonds and other overseas assets, interrupting the downward trend of U.S. bond yields and adding uncertainty to the global market. On Monday, after Bank of Japan Governor Haruhiko Kuroda hinted that an interest rate hike may come later this month, global government bond yields generally rose (bond yields rise when bond prices fall). This statement caught investors by surprise, as it was originally expected that the Bank of Japan would maintain the status quo. Kuroda's remarks pushed the yield on Japan's 10-year government bonds to 1.879% — the highest closing level since June 2008. The U.S. 10-year Treasury yield also rose to 4.095%, while it was slightly below 4% in the middle of last week.

Wall Street is concerned that the rise in Japanese bond yields will attract funds away from U.S. investments, leading to an increase in U.S. Treasury bond yields. Japan is the largest foreign holder of U.S. government debt, holding around $1.2 trillion in U.S. Treasury bonds as of September. This year, the decline in U.S. bond yields has been a contributing factor to the Federal Reserve's decision to cut interest rates again, which has lowered mortgage rates and boosted the stock market — the stock market often benefits from lower bond yields, as investors can no longer achieve the same amount of risk-free return by simply holding bonds to maturity. The signal of Japan tightening its monetary policy has also raised concerns about the prospect of Fed rate cuts, as the rise in U.S. bond yields will be a hindrance to rate cuts.

You may also like

Popular coins

Latest Crypto News

Read more