Japan Dumps $30B in U.S. Bonds as Yields Soar

- Japanese investors sold $29.6 billion in U.S. government-linked debt in Q1 2026, ending an 11-quarter buying streak - Rising domestic yields and shifting global rate expectations increase pressure on international credit markets Japanese investors sold $29.6 billion in U.S. government-linked debt during the first quarter of 2026, marking their largest quarterly retreat since 2022 and ending an 11-quarter streak of net purchases. This dramatic shift comes as Japanese government bond yields surge, persistent domestic inflation intensifies, and global monetary policy expectations change. On 2026-05-18, CoinDesk reported that the yield on the 10-year Japanese government bond reached 2.73%, while the 30-year climbed to 4% for the first time since 1999. The sharp rise in Japanese yields has therefore made local bonds significantly more attractive, especially as inflation persists and the Bank of Japan is widely expected to raise policy rates. At the same time, global bond yields have soared amid geopolitical uncertainty and higher oil prices, and traders now anticipate U.S. Federal Reserve rate hikes instead of cuts. As a result, borrowing costs have increased for both corporate and mortgage markets. Japanese investors still remain the largest foreign holders of U.S. government debt, with approximately $1.24 trillion in holdings. However, their recent outflows are intensifying strains across global bond and credit markets, and the sell-off is contributing to sharply rising yields in U.S. Treasury, corporate, and mortgage-backed securities. As a result, Japan’s shifting bond strategy is affecting borrowing costs and market liquidity worldwide.