Part 8/13:
The retreat of Japan from its role as a major US creditor presents a profound problem: Who will finance America’s ever-growing deficits and debt? Rising bond yields are already pushing borrowing costs higher across the board. Mortgage rates are near 7%, up from roughly 2.6% during the pandemic. Credit card interest rates are at historic highs, and car loans are becoming more expensive.
The familiar era of cheap money—defined by decades of foreign appetite for US debt—is coming to an end. This change isn't transient; it's structural. As Japanese investors pull back due to aging populations, increasing domestic yields, and regulatory pressures, the US will need to find new sources of capital at higher costs.