# Market Shockwaves from Japan: Yen Exchange Rate and Bond Yields Signal Trouble

The global financial markets are witnessing quiet turmoil. Just as investor sentiment was stabilizing after concerns sparked by U.S. President Donald Trump’s tariff announcements, new shockwaves have emerged from Japan’s financial sector. Yields on 30-year Japanese government bonds have soared to their highest levels in 20 years, and net long positions in the yen have hit record highs, causing growing apprehension about a potential unwinding of yen carry trades.

# Yen Net Long Positions Hit Record Highs

According to the U.S. Commodity Futures Trading Commission (CFTC), net long positions on the Japanese yen reached 308,736 contracts in the 15th week of 2025, marking a surge of 48,415 contracts from the previous week. This is the highest level since the CFT started tracking these figures in 1986. Similar spikes have been observed during extreme risk-off periods, such as the 2008 financial crisis, the 2011 European debt crisis, and the early days of the 2020 pandemic. The transition of this indicator to an extreme net long position suggests that key market players view the yen as a safe haven asset and are rapidly buying it.

# Japanese Government Bond Yield Shock: A 60 Basis Point Surge

Unusual patterns are also evident in the Japanese government bond market. As of April 15, the yield on 30-year Japanese government bonds rose to 2.88%, up 60 basis points (0.6%) from the previous week, marking the highest level since 2004. The yield spread between the 30-year and 5-year bonds has widened to a 20-year peak, and the 10-year bond yield has also increased to 1.37%. These trends indicate that investors are demanding higher premiums for holding long-term bonds. The sharp rise in ultra-long-term bond yields could signal a structural change affecting global capital flows, rather than being merely a technical adjustment. As Japan is the world’s largest net international investment country and the largest holder of U.S. Treasury securities ($1.079 trillion), shifts in its capital allocation can significantly impact global financial markets.

# Return of Japanese Capital? Global Risk-Off Concerns

The surge in ultra-long-term bond yields could raise domestic asset returns, potentially altering the portfolio strategies of institutions that have invested heavily in overseas assets. Japanese institutional investors, including pension funds such as the Government Pension Investment Fund (GPIF), life insurance companies, and investment funds, have traditionally invested in U.S. bonds, global equities, and riskier assets like Bitcoin to offset low domestic yields. As Japanese bond yields rise, a repatriation of these assets could commence. Garry Evans, chief global asset allocation strategist at BCA Research, warned in a CNBC interview that “Japan is the country with the largest international investments,” emphasizing that a return of these funds to Japan could negatively impact global markets.

# Bitcoin Faces Uncertainty Amid Recovery Attempt

Amid sharp declines in traditional asset classes like the S&P 500 and Nasdaq following Trump’s tariff threats, Bitcoin managed to hold relatively steady, reinforcing its status as a digital safe haven. However, the sustainability of this recovery remains uncertain. In August of the previous year, the unwinding of yen carry trades led to a sharp drop in Bitcoin prices. Should Japanese capital repatriation resume, Bitcoin could again face short-term selling pressure. The recent strengthening of the yen and the surge in long-term bond yields extend beyond the bond market, potentially triggering broader impacts on carry trade structures and interconnected global risk assets.