In the past couple of days, the Japanese government bond market has exploded. The numbers speak for themselves: the 2-year government bond yield has surpassed the 1% mark for the first time in 17 years; the 5-year yield soared to 1.345%, setting a new record since June 2008; and the 30-year yield was even more extreme, reaching as high as 3.395%, directly rewriting history.

This is no small matter. You have to know, from 2010 to 2023, Japan’s 2-year government bond yield was basically stuck in the -0.2% to 0.1% range and couldn’t move. Borrowing money in Japan during that period? It was like manna from heaven, with interest rates so low they were almost nonexistent, and sometimes banks even had to pay you.

Why did it turn out like this? You have to go back to 1990. That year, Japan’s economic bubble burst, and after that, the country fell into the trap of deflation and couldn’t get out—prices didn’t move, wages didn’t rise, and people held tight to their wallets and didn’t spend. The Bank of Japan panicked and launched the world’s most aggressive measures: zero interest rates, negative interest rates, YCC (Yield Curve Control)... driving funding costs to rock bottom and trying every possible way to force the market to move.

But now? The script has been completely rewritten. Yields have turned positive, soaring to 1%, and this is not just Japan’s own business. The global financial markets have to brace themselves for the impact.

The first to be affected is monetary policy, which is taking a sharp turn. Zero interest rates, negative interest rates, and YCC are all things of the past. Japan is no longer the world’s only “outlier” economy maintaining ultra-low interest rates; the era of easy money is officially over.