The Bank of Japan just hiked its policy rate to 1% (highest since 1995) at the June 15-16 meeting, with expectations it may pause bond tapering amid jittery JGB markets. The yen has been hovering near 160/USD despite prior interventions (authorities spent ~11.7 trillion yen / $73B recently), prompting fresh warnings of ādecisive measuresā from the finance ministry. Ten-year JGB yields have climbed toward the mid-2% area (with longer tenors higher), reflecting both BOJ normalization and fiscal expansion concerns under the current administration.
Real wages have been under pressure, import costs elevated (energy/Middle East factors), and debt-to-GDP sits around 230-237% ā the highest among major economies. Fiscal policy has turned more expansionary (stimulus, subsidies on fuel/food), with a shift toward managing the debt-to-GDP trajectory over multiple years rather than rigid primary-balance targets. Growth forecasts remain modest (~0.5-0.8% range for 2026).
Markets are not treating this as an imminent crisis.
The Nikkei has hit record highs at times, and some analysts (e.g., Ed Yardeni) argue Japanās issues wonāt cascade into a major global problem the way a true emerging-market or leveraged Western blow-up might. Carry-trade unwind fears appear more muted than in prior episodes. Period.