Japan is getting squeezed from every direction at once, and it's bad news for both Tokyo and the US bond market that depends on Japanese buyers.

• The Fed is expected to keep raising rates to fight inflation, which pushes US government borrowing costs even higher as the budget deficit balloons.
• To defend a collapsing yen, Japan has already sold off over $150 billion in US Treasury bonds this year, and both government and private Japanese investors are now pulling money home to buy higher-paying Japanese bonds instead.
• Since Japanese investors hold trillions in US stocks and bonds, this shift away from US assets could hit Wall Street and the AI-stock rally if it keeps building.
• A major banking system outage knocked 128 Japanese banks offline for a stretch, cutting people off from ATMs and transfers and reviving fears about trusting money to systems that can simply switch off.
• Japan is also exposed to Russia through energy and tobacco investments that Moscow has started seizing, pushing Tokyo toward awkward talks with Putin, possibly over reducing support for Ukraine.

Outlook: Expect Japan to keep selling US assets to prop up the yen, adding pressure to US bond yields and raising the risk of spillover into US stocks.