Rising JGB yields increase Japan bond investment appeal, likely prompting ETF
inflows. Higher yields boost the Japanese government’s interest burden, raising
debt-service costs in FY2027. Higher domestic rates are theoretically supportive
for the JPY, but fiscal risk and institutional FX hedging should offset part of
the currency effect. Net of opportunity cost, reduced incentive for Japanese
capital to hold overseas debt is negative for UST demand and may lower Japanese
allocations to foreign bonds. Market implication: Japan is ceasing to be a
zero-rate funding pool, altering global bond funding and pricing dynamics.
