Japan’s Yield Curve Signals the Deepest Global Debt Strain

The piece argues that debt stress is rising globally, but Japan is the standout: its long-end yield curve has steepened far more than peers, suggesting high implied risk premia and a distorted 'shadow yield' that makes a debt crisis feel like a yen-centered currency crisis; while the US, Germany, the UK, Italy, and France show rising long-term yields, none match Japan’s divergence, highlighting that debt sustainability now hinges on long-term yields and market expectations about risk premia.