Support us Japan's falling yen could soon reverberate in US debt markets. Image: X Screengrab For decades, the global financial system has been founded on a convenient assumption. The US would keep taking on more debt, and countries like Japan would cover the bill. America got to borrow money at low interest rates, while Japan got to amass massive cash reserves invested in US Treasury bonds. And in the meantime, Japan became an export-driven nation as low interest rates fueled growth among its many multinational companies. After decades of mutual gains, that bargain is beginning to crack. The recent dramatic depreciation of the Japanese yen is often portrayed as a Japanese domestic problem. But behind the weakening yen lies a structural imbalance that could shake global financial markets, exposing vulnerabilities not only in Tokyo but also in Washington. Ironically, what begins as a currency crisis in Asia could become a debt crisis in the United States. The greater danger is not merely a falling yen; it is the possibility that one of America’s largest creditors may no longer be willing — or able — to finance America’s expanding fiscal excess.
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