Japan, the largest foreign holder of U.S. debt, is experiencing a major domestic bond market crisis in early 2026, leading to a significant sell-off of U.S. Treasuries to cover losses and repatriate capital. Rising yields on Japanese government bonds are reducing the attractiveness of foreign assets, causing a potential "$400 billion fire sale" of U.S. debt.

Analysts view this as a "warning sign" for the U.S., as bond vigilantes might demand higher interest rates due to the U.S.'s own large debt, reported by Business Insider.

https://www.businessinsider.com/japan-bond-selloff-ken-griffin-vigilantes-us-debt-fiscal-policy-2026-1