Economist Peter Schiff warned of potential global economic consequences as a rapid jump in Japanese government bond yields could trigger shockwaves beyond Japan.

JGB Yields Rising

In Tuesday’s post on X, Schiff said, "A real crash" is in the making, and "the shockwaves will extend well beyond Japan. All fiscal chickens are coming home to roost." The economist is referring to the government's years-long policy to suppress Japan's bond market and interest rates, sparking concerns of potential fallout.

The comments come as the 10-year JGB yield spiked to above 2.8%, the highest level in 29 years and higher than the 1.6% yields seen 10 months ago. The 30-year yield climbed above 4% for the first time.

In just ten months, the 10-year JGB yield has risen to over 2.8%, the highest in 29 years. The 30-year yield is above 4% for the first time ever. This is a real crash in the making, and the shockwaves will extend well beyond Japan. All fiscal chickens are coming home to roost. https://t.co/aFGn0QrmLF

— Peter Schiff (@PeterSchiff) May 19, 2026

Schiff previously said, "They are getting yippy in Japan," describing that higher yields could lead to potential stress in funding markets tied to the yen.

Japan’s Fiscal Policies Fuel Bond Market Turmoil

The surge in Japanese bond yields follows Japan’s approval of a record ¥122.3 trillion ($785 billion) budget for the fiscal year starting in April 2026, driven by increased social welfare and defense spending, which has led some economists to warn of a “rising risk of a debt crisis” in the country.

The previous low-rate environment had supported one of the largest carry trades globally, where investors borrowed in yen to invest in higher-yielding assets abroad. The Bank of Japan (BoJ) raised interest rates to 0.75% in December, marking the highest increase since 1995.  

The latest report shows that Japan’s economy grew 2.1% annually in the first quarter, up from revised 0.8% growth and the expected growth of 1.7%. The CNBC reported that the strong growth might bolster the case for BoJ interest rate hikes.

Currency Intervention Risks Amid Yen’s Decline

The yen has weakened and is trading around 160 against the U.S. dollar. The Bank of Japan issued a ‘final warning’ regarding potential currency intervention amid significant yen depreciation.

Mohamed A. El-Erian views this level as "a potential catalyst for renewed FX intervention by the authorities."

The market seems willing to test Tokyo's resolve once more, weakening the yen toward the 160 mark—a level widely seen as a potential catalyst for renewed FX intervention by the authorities.#economy #fx #japan #markets pic.twitter.com/lDKfbWrb8t

— Mohamed A. El-Erian (@elerianm) May 19, 2026

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga editor.

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