Japan Is the First Domino in the Sovereign Debt Crisis
Japan recorded a 1.01 trillion yen ($6.2 billion) trade deficit during the first half of 2026, according to preliminary government data. This does not mean that Japan will collapse tomorrow, but it is another crack in the foundation of a debt structure that can no longer withstand rising interest ra
Source: Armstrong Economics
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DW NOTE
Japan ran a ¥1.01 trillion trade deficit in H1 2026 while servicing a debt-to-GDP ratio above 260%. The JGB market only functions because the BOJ owns most of it. When treasury yields worldwide are rising — the US 10-year is at 4.71%, up 7% year-on-year — a central bank that has spent decades suppressing rates below inflation has no room left to manoeuvre without triggering either a bond rout or a currency collapse.