Japan's 3.075% bond yield gives its institutions a reason to keep money at home

The selloff was largest in the middle of the curve and smallest at the long end. Five- and 10-year yields each rose 10 basis points, the 20-year 8 and the 30-year 6 ^[2][3][4], so the move faded beyond the 10-year point ^[3]. That shape fits a market pricing further BOJ hikes. Governor Kazuo Ueda signaled that more could follow, and worries about domestic inflation kept pressure on bonds ^[6]. The 10-year now yields 1.825 percentage points more than the policy rate ^[2].

"Interest rates are being reviewed globally, and Japan's interest rates are particularly low," Masayuki Koguchi, executive chief fund manager at Mitsubishi UFJ Asset Management, told Reuters ^[8]. "So when the market finds a negative market cue, the selloff accelerates," he said ^[9].

For a Japanese institution, the comparison that counts is against a hedged Treasury. When the 10-year briefly crossed 3% earlier in September, a yen-hedged 10-year Treasury paid a Japanese buyer roughly 2% ^[10][11]. Buying at home earned about one percentage point more ^[1]. BlackRock's $55 billion scenario rests on that gap ^[12]. Fitch Ratings said higher domestic yields could encourage institutions to keep more capital at home, though it did not predict a large liquidation of existing overseas bond holdings ^[13].

Neither firm offered an observed flow, and the evidence fits more than one path. On Fitch's path, new yen goes into JGBs while existing Treasury books stay put, so the US market loses some marginal demand without meeting a seller. The larger path is reallocation on BlackRock's scale. The disorderly one repeats August 2024, when leveraged positions across markets were cut as Japanese policy and currency moves forced investors to reassess cheap yen funding ^[14]. That path needs a rising yen, because investors who borrowed yen pay more to close or service positions when the currency climbs ^[17]. This time the yen fell ^[7].

I'd expect Fitch's path. On this evidence, Japan adds to upward pressure on global yields through money its institutions now invest at home that would otherwise have gone abroad. The more immediate push still comes from the US, where Treasury yields are above 5%, the dollar is stronger and traders expect another Fed hike ^[15]. Jamie Elkaleh, chief marketing officer of Bitget Wallet, said earlier that the Fed remained the dominant central-bank signal for Bitcoin and that the BOJ was a risk markets could be underestimating ^[16]. The case against my view is a BOJ that keeps hiking ^[6]. I would be wrong if Japan's Treasury holdings fell by more than BlackRock's $55 billion, or if the yen rallied hard enough to force leveraged holders out ^[12][17].