Markets React to Japan’s Bond Yield Rise and AI Sector Insights

The numbers tell a story that no single headline can capture. Japan’s 30-year government bond yield touched 3.38%—the highest level in history. Bitcoin has plunged below $86,000, down over 7% in 24 hours. The S&P 500 shed 1.56%, while the Nasdaq dropped 2.15%. Nvidia, fresh off a blockbuster earnings report that beat every estimate, somehow managed to give back all its gains and more. 

What markets are pricing today isn’t a single catalyst. It’s the convergence of three structural forces that have been building for months: the death of Japan’s zero-rate regime, the unraveling of the yen carry trade, and deepening questions about whether the AI boom is built on phantom revenue. 

The proximate cause sits in Tokyo. Japan’s 30-year government bond yield rose to 3.38% on Thursday before easing to 3.32%—still the highest level since the series began in 1999. The 10-year yield climbed to 1.80%. These aren’t just numbers on a screen. They represent the end of a thirty-five-year regime that has quietly underwritten global risk-taking. 

For decades, Japan’s near-zero interest rates made the yen the one of the world’s preferred funding currency. Investors borrowed yen cheaply, converted to dollars, and invested in higher-yielding assets—U.S. Treasuries, equities, crypto, emerging markets. Estimates of this “carry trade” range from $350 billion in transparent positions to as high as $20 trillion when including derivative exposures and synthetic structures. 

When Japan’s yields rise, the mathematics of this trade break down. Higher Japanese rates mean higher borrowing costs. A stronger yen—which typically accompanies rate rises—erodes returns on foreign investments. At some threshold, the trade flips from profitable to unprofitable, triggering systematic liquidation. 

We saw a preview in July-August 2024. When the Bank of Japan raised its policy rate to 0.25%, the yen surged 12% in three weeks. The Nikkei 225 fell 12.4% in a single session. The Nasdaq dropped 13% peak-to-trough. That was a modest unwind of perhaps $500 billion. The total exposure of the unwind was of a larger magnitude. 

What’s changed now is that Japan’s fiscal position has become untenable. Prime Minister Sanae Takaichi’s government is preparing fiscal stimulus worth 17-21 trillion yen while simultaneously increasing defense spending toward the NATO 2% standard. Gross government debt stands at 230% of GDP. At current yield levels, debt service will exceed 10% of tax revenue by fiscal 2027—a threshold historically associated with fiscal crises. 

The bond market is repricing this reality in real time. Life insurers and pension funds—traditionally the largest domestic buyers of Japanese government bonds—are demanding higher yields to compensate for inflation risk and fiscal uncertainty. The Bank of Japan, which holds 51% of all outstanding government bonds, cannot sell without triggering a yield spike that would overwhelm government finances. 

This is what economists call fiscal dominance—a regime where monetary policy is subordinated to fiscal sustainability. Japan has entered it. And the implications ripple across every market globally.  

Against this macro backdrop, the AI trade is facing its own moment of reckoning. Nvidia reported fiscal Q3 results that exceeded every estimate: $57.01 billion in revenue against $54.9 billion expected, earnings of $1.30 per share against $1.25 expected, and guidance for $65 billion in Q4 sales versus Street estimates of $61.66 billion. 

CEO Jensen Huang dismissed bubble concerns on the earnings call, noting that “Blackwell sales are off the charts” and “cloud GPUs are sold out”. He pointed to a $500 billion pipeline of AI chip orders through 2026. 

Yet Nvidia shares gave back their post-earnings gains within hours and are now trading around $180—down from highs above $212 last month. What’s happening? 

Beneath the headline numbers, forensic analysis reveals warning signs. Nvidia’s Days Sales Outstanding — a measure of how long it takes to collect payment — has risen to 53.3 days, up from a five-year average of 46 days. That gap represents $4.39 billion per quarter in receivables that aren’t converting to cash on historical timelines. 

Inventory has accumulated by 32% quarter-over-quarter to $19.8 billion, even as management claims demand exceeds supply. Operating cash flow came in at $14.5 billion against $19.3 billion in net income — a 75% conversion ratio that trails industry peers significantly. 

These metrics raise questions about the nature of demand. Third-party GPU compute prices on platforms like Vast.ai have collapsed 40% since August, from $3.20-$3.40 per hour to $1.92-$2.12. If demand truly exceeded supply, spot prices would rise, not fall. 

The deeper issue is the circular financing structure that underpins the AI boom. Nvidia invests in AI startups like xAI. Those startups use the capital to lease Nvidia GPUs. Nvidia books the leases as revenue. The cash flows in circles, with each entity’s valuation dependent on the others’ commitments materializing. 

OpenAI, valued at $157 billion, generates $3.7 billion in annual revenue against $13 billion in operating expenses—a $9.3 billion annual cash burn. For that valuation to prove justified at standard venture capital return multiples, the company must eventually generate cumulative profits exceeding $3.1 trillion. An MIT study found 95% of enterprise AI implementations fail to generate positive ROI within two years. 

The question isn’t whether AI is transformative technology. It is. The question is whether current infrastructure investment can generate returns before the funding structure collapses under its own weight. 

These three forces — Japan’s fiscal dominance, the carry trade unwind, and AI’s funding question — connect through a single transmission mechanism: the global cost of capital. 

Since the early 1990s, abundant yen liquidity has suppressed neutral interest rates worldwide by 30-50 basis points. As Japan’s zero-rate era ends, this suppression dissipates. Conservative estimates place the structural increase in global neutral rates at 50-75 basis points. More aggressive models suggest 75-100 basis points. 

Every asset price globally is a discounted stream of future cash flows. When the discount rate rises 75 basis points, valuations compress proportionally — roughly 12-15% for equities, all else equal. This isn’t a cyclical adjustment that central banks can offset. It’s a permanent shift in the equilibrium cost of capital. 

For leveraged strategies, the math is worse. The interest rate differential between dollar and yen assets generates 5.3-5.7% annualized returns at current exchange rates. But if the yen strengthens beyond approximately 152 per dollar — currently at 157 — carry returns compress below hedging costs. At that point, systematic liquidation begins. 

Japanese investors hold $3.2 trillion in foreign securities. Life insurance companies and pension funds have increased foreign bond allocations to 15-20% of portfolios. Repatriation of even a fraction would drain liquidity from U.S. Treasuries and European government bonds. A sustained carry unwind would force deleveraging across multiple asset classes simultaneously. 

The shift in global liquidity conditions rippled through every risk asset simultaneously on 20 November, but not uniformly. 

On 20 November, the sell-off began in Asia and accelerated through European hours. By the time New York opened, the damage was already done. The Dow Jones Industrial Average fell 386 points, or 0.84%. The S&P 500 lost 103 points. The Nasdaq, weighed down by technology shares, dropped 486 points. The VIX spiked 11.67% to 26.42 — a level not seen since the April 2025 tariff panic. 

The striking feature of Thursday’s selloff was its breadth. There was no obvious catalyst—no surprise Fed announcement, no tariff shock, no earnings miss. Even Nvidia’s blowout quarter couldn’t sustain a bid. Traders on social media called it “pure, unexplained liquidation chaos”. But the explanation exists. It’s just not simple. 

Crypto markets offered no refuge. Initially, Bitcoin dropped from above $92,271 to $83,461, triggering $831 million in liquidations across exchanges. According to Coinglass, 227,500 traders were wiped out in 24 hours, with $696 million in long positions forcibly closed. Ethereum slipped to $2,700, down 10.3%. 

Against this macro backdrop, crypto markets reflected the broader deleveraging, but with critical distinctions that reveal underlying strength. 

Bitcoin slid sharply over the past week, tracking the equity selloff. On 20 November, it plunged from $93,000 to roughly $83,000 – a drop of almost 10%. This triggered roughly $831 million in long liquidations. Crypto flows worsened as U.S. spot Bitcoin ETFs saw nearly $900 million of outflows in one session and sentiment hit extremes with the Crypto Fear & Greed Index dropping to “extreme fear”.  

Ethereum fell in lockstep. ETH slid from highs above $3,000 to about $2,700, which is a 13.5% weekly decline. Onchain data showed that this sell-off came from recent buyers who capitulated as their loss metrics spiked. Meanwhile, spot ETH ETFs have accumulated roughly 360,000 ETH in November (worth roughly $965 million at current prices).  

Across altcoins, the carnage was even steeper. Solana plunged about 10% in a day and XRP, BNB, ADA each dropped roughly 8–15%. On average, large alts have retraced 20–35% from their early‑November 2025 peaks.  The forced unwind was brutal as roughly $2 billion of crypto positions were liquidated in 24 hours, including $407 million in ETH and widespread blows to smaller caps. 

Yet beneath this surface volatility, a divergence emerged that carries significant implications. It is clear that weak hands (short term holders and speculators) continue to capitulate while strong hands continue to accumulate. Some addresses that have never sold Bitcoin in the past (referred to as “permanent holders”) bought roughly 345,000 BTC during the recent drawdown. This marks one of the largest supply absorptions by whales across cycles. This substantial accumulation occurred even as the price fell, highlighting a stark divergence between long-term and short-term market behaviors. 

Meanwhile, the broader support for Bitcoin has never been stronger. For example, even during a month when Bitcoin is down by over 24%, El Salvador acquired more Bitcoin. The government bought 1090 BTC for roughly $100 million for its Strategic Bitcoin Reserve. Since adopting Bitcoin as legal tender in 2021, El Salvador has accumulated roughly 7,474 BTC in total. Additionally, Bitcoin treasury companies continue to aggressively acquire more BTC. Total holdings by Bitcoin treasury companies have increased by over 15,000 BTC this month alone. For example, Michael Saylor’s Strategy acquired over 8,170 BTC for roughly $835 million, bringing its total bitcoin holdings to 649,870 BTC. During a time when short-term retail speculators and over-leveraged derivative traders bled, the strong hands with a “buy the dip and HODL” mindset swooped in. 

This divergence between short-term speculators and long-term institutional accumulators suggests the sell-off was driven by forced liquidations and panic rather than fundamental deterioration. When sovereign entities and treasury companies increase exposure during drawdowns of this magnitude, it signals conviction in long-term value propositions that are independent of short-term price action. 

The Bank of Japan’s monetary policy meeting next month, on 18 and 19 December, provides the next critical inflection point. Reuters polling shows 51% of economists expect a 25 basis point rate increase to 0.75%. 

For global markets, the base case remains gradual adjustment — contained volatility, no systemic cascade, perhaps 65-70% probability for this to extend over the next 18 months. Japanese institutions can absorb higher yields at current levels. Carry positions remain profitable. The system muddles through. 

But the tail risks are severe. A yen appreciation to 145-150 would compress carry returns and potentially trigger systematic position unwinding worth $500 billion to $1.2 trillion in a short period. A 30-year Japanese government bond yield sustained above 3.6-3.8% would trigger debt service non-linearity — the point where interest costs rise faster than revenue regardless of fiscal measures. 

The largest unknown remains the true size and concentration of yen carry exposure. Modern financial engineering obscures ultimate risk-bearing. Structured products, offshore vehicles, and synthetic positions create connectivity visible only during stress. 

Perhaps most critically, Strategy’s Bitcoin exposure approaches its break-even point. The company’s average cost basis sits around $74,430. With Bitcoin at $87,000, the buffer has compressed significantly. JPMorgan notes the stock faces potential removal from the MSCI index in January, which could trigger billions in passive outflows and inject another layer of stress into already fragile crypto markets. 

Thursday’s sell-off wasn’t a single event with a single catalyst. It was the sound of three tectonic plates grinding against each other simultaneously — Japan’s fiscal reckoning, the carry trade’s contraction, and the AI boom’s collision with accounting reality. 

The financial press will attribute the moves to Fed repricing or technical liquidations. That misses the point. What Tokyo’s bond market signaled this week is that the liquidity regime markets have relied upon since 1990 is entering its terminal phase. Japan may no longer be able to afford to be the world’s lender of last resort. 

The December Bank of Japan meeting will provide the next data point. The January MSCI rebalancing could put some pressure on Strategy. Q4 earnings will test whether AI revenue is converting to cash. Each of these moments carries binary risk that current volatility pricing fully reflects. 

For now, the system remains metastable — stable unless perturbed beyond specific thresholds. Yesterday showed us how close some of those thresholds actually are. 

Despite the washout, the outlook is bright. Bitcoin’s current panic phase (with sentiment at multi‑year lows) often serves as a contrarian buy signal. As discussed earlier, onchain trends reinforce this where several whales have actually been accumulating through the dip. In fact, BTC has attracted bids from major treasury companies like Michael Saylor’s Strategy and from the government of El Salvador. If macro volatility eases and ETF flows stabilise, this capitulation could mark the start of a recovery. We are currently in a cautiously optimistic scenario where short-term pain seeds long term gain.

Disclaimer 

This document has been prepared by AMINA Bank AG (“AMINA”) in Switzerland. AMINA is a Swiss licensed bank and securities dealer with its head office and legal domicile in Switzerland. It is authorized and regulated by the Swiss Financial Market Supervisory Authority (“FINMA”). 

This document is published solely for educational purposes; it is not an advertisement nor a solicitation or an offer to buy or sell any financial investment or to participate in any particular investment strategy. This document is for publication only on AMINA website, blog, and AMINA social media accounts as permitted by applicable law. It is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or would subject AMINA to any registration or licensing requirement within such jurisdiction. 

Research will initiate, update and cease coverage solely at the discretion of AMINA. This document is based on various sources, incl. AMINA ones, and was generated using artificial intelligence (“AI”). No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained in this document, except with respect to information concerning AMINA. The information is not intended to be a complete statement or summary of the subjects alluded to in the document, whereas general information, financial investments, markets or developments. AMINA does not undertake to update or keep current information. Any statements contained in this document attributed to a third party represent AMINA’s interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. 

Any formulas, equations, or prices stated in this document are for informational or explanatory purposes only and do not represent valuations for individual investments. There is no representation that any transaction can or could have been affected at those formulas, equations, or prices, and any formula(s), equation(s), or price(s) do not necessarily reflect AMINA’s internal books and records or theoretical model-based valuations and may be based on certain assumptions. Different assumptions by AMINA or any other source may yield substantially different results. 

Nothing in this document constitutes a representation that any investment strategy or investment is suitable or appropriate to an investor’s individual circumstances or otherwise constitutes a personal recommendation. Investments involve risks, and investors should exercise prudence and their own judgment in making their investment decisions. Financial investments described in the document may not be eligible for sale in all jurisdictions or to certain categories of investors. Certain services and products are subject to legal restrictions and cannot be offered on an unrestricted basis to certain investors. Recipients are therefore asked to consult the restrictions relating to investments, products or services for further information. Furthermore, recipients may consult their legal/tax advisors should they require any clarifications. 

At any time, investment decisions (including, among others, deposit, buy, sell or hold investments) made by AMINA and its employees may differ from or be contrary to the opinions expressed in AMINA research publications. 

This document may not be reproduced, or copies circulated without prior authority of AMINA. Unless otherwise agreed in writing, AMINA expressly prohibits the distribution and transfer of this document to third parties for any reason. AMINA accepts no liability whatsoever for any claims or lawsuits from any third parties arising from the use or distribution of this document. 

©AMINA, Kolinplatz 15, 6300 Zug