Japan: The Quietest "Lehman Moment"!

Tomorrow, March 31, is the last day of Japan’s fiscal year; the due date of a “Ponzi structure” that has spanned three decades. The day after tomorrow, April 1, the gray rhino—J-ICS (economic value solvency and capacity regulation)—that has been discussed for years will officially take effect.
War is always just a scalpel; the deep-seated fragility accumulated over years in the financial system is the root cause. War is the external factor that rips the scab off an economic collapse. The Middle East war has drawn everyone’s attention, while the deeper Black Swan—Japan—has, without anyone noticing, begun to spread its wings.

The world’s wound is the four decades-long expansion of debt leverage and credit expansion. The essence of the global financial system is, in other words, nothing more than a Ponzi structure—there has always had to be a steady, continuous injection of new liquidity to keep paying interest on old debt. The situation in 2026 is that total global debt has already surpassed $34.8 trillion, accounting for 308% of GDP. This number means that even without a war, the financial system would ultimately choke to death because of interest expenses that are too high.
The Middle East war at the start of ’26 suddenly broke two axioms supporting financial dominance: one is the continuous supply of cheap energy
and seamless global supply-chain integration. When the Strait of Hormuz is closed, it doesn’t merely cut off oil supply—it also removes the physical anchor supporting credit fiat currency.
Generations haven’t experienced a scenario like this, so they can’t use experience to spot the risks that may be appearing now. Perhaps today’s fragility is **the sum total of the 1914/1929/1970s. Before 1914, the world was deeply fused in a way people thought was impossible for war—then World War I came. In 1929, there was a global severe concentration of asset prices and a leveraged bubble. And now, the concentration of tech giants and the U.S. Treasury market is already far beyond the level before the U.S. stock market crash of that era. In 1970, the inflationary stagnation shadow brought by the oil crisis—energy prices skyrocketing paired with capacity disruptions—meant that central banks had basically lost the room to maneuver between fighting inflation and rescuing the economy.
Logically, this conflict has a “structural inevitability” because the old order’s provider (the United States) can no longer afford the costs of maintaining it, while the dependent (Japan) is starting to be forced to hand over the accumulation of 40 years.
Financial systems often die by the rules they themselves write.

Japan is over 90% dependent on imported energy. With the strait closed, the 80 million barrels of reserve oil Japan releases are just a drop in the bucket in the face of physical consumption. Energy price hikes expand trade deficits. When Japan’s yen is dumped and depreciates sharply, imported energy becomes even more expensive. The central bank then dares not raise rates (government debt interest would instantaneously blow up the fiscal budget), nor dare to cut rates (otherwise the yen would directly and rapidly jump and depreciate). Over the past 40 years, Japan’s financial institutions—especially some insurers and pension funds—have been able to survive thanks to an accounting-level “sanctuary”: cost-price accounting. As long as I don’t sell, unrealized losses on government bonds on the books do not exist. Starting from April 1, J-ICS requires that all assets be **** marked to market. With current Japanese 10-year JGB yields already surging past 2.3% and 30-year yields nearing 4%, under the new rules, these financial institutions’ solvency adequacy ratios will instantaneously fall below the red line. They will be mechanically forced by regulatory rules to sell overseas assets (U.S. Treasuries, European sovereign bonds) back and forth to recapture cash flows for self-rescue—on exactly the same day the Strait of Hormuz is closed. Whether you call it fate or the natural law of cause and effect, this is simply such a coincidence: a once-in-a-century kind of turning point has, at one moment, gathered extra intersections, creating resonance—no one can escape.

As soon as Japan dumps U.S. Treasuries to rescue itself, there is no doubt that U.S. Treasury yields will directly surge to 6%. The volatility of the mother of global asset pricing (U.S. Treasuries) can directly shatter all derivatives pricing models, and all collateral will be repriced from scratch. Global markets will split into two camps: those with resources and capacity, and those with only debt and credit. This is the “grave” of global liquidity. Japan, the world’s largest net creditor, is a bottomless black hole.
Can this situation be avoided**?**
People come out to settle their debts sooner or later. It’s not that it won’t be reported; it’s just that the time hasn’t come. Right now is the beginning of the total settlement of all events. Judging from the global situation from now on, this kind of reckoning is almost unavoidable. If it is to be avoided, there is only one possibility: it would require major leading countries to reach some kind of “21st-century Plaza Accord,” reallocate benefits and cancel debts. But given today’s global trust environment, do you think that’s possible?
Global geopolitics is a once-for-all order-wide reset. All paper wealth will start to deflate into reality. It will gradually transition toward real assets (resource-related), which will command more persistent premium. Globalization will be replaced by bloc formation, and the world will retreat back to 19th-century-style spheres of influence composed of self-contained powers. For debt countries like Japan with severe aging, this kind of reckoning will trigger a seismic shift in the structure of social classes, and welfare systems may face an effective shutdown.

Recognizing reality is the hardest thing—this is true for individuals, and for countries as well. Everyone hopes they are the survivor who can run away. But as European Central Bank President Lagarde said recently, Europe’s “recognition” is compelled and imbalanced. Reality may be far more severe than the market imagines. They have already realized this is no longer just a simple fluctuation in prices; it is a permanent loss in the structure of energy supply. Market optimism is often the best catalyst for disaster.
Based on the current situation, with the new rules taking effect on April 1, Japan’s large-scale selling (especially of overseas assets) is no longer a question of whether it will happen, but rather one of how big the scale will be and how fast it will move.**
We should carefully watch the volume of selling after the Tokyo open on April 1. If U.S. 10-year Treasury yields rise rapidly by 20–30 basis points, it means Japanese institutions have started moving. Ultimately, the result may be ironically that, in order to save its own insurance system, Japan accidentally lit the fuse of the powder keg in the global Treasury bond market.****
The reason the market hasn’t broken down yet is because everyone is betting that maybe on April 1 there will be a miracle. This is the same logic as betting oil prices will only move in the short term. Or people are even more willing to believe that April 1 is merely April Fools’ Day.