Japan’s Bond Massacre: 40-Year Yields Hit Record 3.68% – The $3.4 Trillion Crypto Carry Trade Is Unwinding Fast

Mid-November 2025 finds Japan's government bond market in full meltdown mode with the 10-year JGB yield spiking to 1.78% (highest since 2008), the 30-year at 3.28%, and the ultra-long 40-year hitting a record 3.68%. Prime Minister Sanae Takaichi's upcoming ¥17 trillion ($110 billion) stimulus package, almost 2% of GDP on top of Japan's already world-leading 263% debt-to-GDP ratio, is the trigger. Afraid that continuous fiscal growth would eventually spark inflation and ruin the yen, investors are mass dumping JGBs and make the debt mountain uncontrollable.

For risk assets, the sudden reversal of the decades-old yen carry trade is the actual nightmare. For years, global funds borrowed almost gratis yen and injected the revenue— estimated at more than $3.4 trillion—into everything from Bitcoin to U.S. equities. As Japanese yields rise, that trade is unwinding swiftly: Japanese life insurers and pension majors are repatriating capital from U.S. Treasuries (perhaps withdrawing >$1 trillion in liquidity), while higher financing costs are causing leveraged investors to deleverage. Goldman Sachs adds that every 10 bp increase in JGB yields pushes U.S., European, and U.K. bond yields by 2–3 bps, hence generating a worldwide tightening wave that suppresses demand for speculative assets.

Crosshairs are directly over cryptocurrency markets. As carry-trade positions are closed out in advance of the Bank of Japan's important December 18 policy meeting, where another interest rate rise might speed the anarchy, Bitcoin and altcoins could see strong liquidity drain and forced selling. Though near certain, short-term discomfort, some macro voices claim Bitcoin's hard-capped supply could eventually shine as the ultimate hedge against Japan's debt spiral and a collapsing yen—turning today's villain into tomorrow's beneficiary.