Why Today’s Market Selloff Is Really About Japan And Not Greenland

Headlines vs. Market Reality

Global markets opened the week in turmoil. Headlines focused on renewed geopolitical tension after President Donald Trump threatened tariffs on Europe tied to a controversial push involving Greenland. By the time U.S. markets opened after the holiday, equities were already sliding sharply, gold surged to record highs, and traditional safe havens such as U.S. Treasuries and the dollar failed to offer protection. The S&P 500 posted its worst session in months, falling more than 2 percent as investors rushed to de-risk.¹

At first glance, the explanation seemed straightforward: geopolitical shock, trade-war fears, and rising uncertainty. Yet a closer look at the timing revealed something unusual. The selloff was already accelerating before European and U.S. markets had even opened. The initial shock did not originate in Washington, Brussels, or Greenland. It began several hours earlier in Tokyo.

While political headlines dominated the news cycle, bond markets were reacting to something far more fundamental. A sharp and unprecedented surge in Japanese government bond yields set off a global chain reaction that rippled through currencies, equities, and sovereign debt markets worldwide.² What appeared to be a geopolitically driven selloff was, in reality, a structural repricing of global liquidity driven by Japan.

Japan’s Bond Market Breaks Its Silence

For decades, Japan’s bond market has been defined by stability. Ultra-low yields, aggressive central bank support, and a predictable policy framework turned Japanese government bonds into one of the calmest corners of global finance. That calm broke abruptly.

In early Asian trading, yields on long-dated Japanese government bonds surged to record levels as investors fled the market.³ Yields on 20-, 30-, and 40-year bonds jumped sharply within two sessions, moves more commonly associated with financial crises than developed markets.⁴ The catalyst was domestic political risk. Prime Minister Sanae Takaichi announced a snap election alongside sweeping fiscal proposals, including tax cuts and expanded spending aimed at stimulating growth.⁵

With Japan already carrying the largest debt burden in the developed world, bond investors reacted decisively. Demand evaporated, liquidity thinned, and yields spiked as sellers overwhelmed buyers.⁶ Several market participants compared the episode to the United Kingdom’s gilt crisis in 2022, when unfunded fiscal promises triggered a violent bond market revolt.⁷

This was not a technical adjustment. It was a regime shift. Japan’s long-standing role as the anchor of low global yields was suddenly in question. Even more important, the shock struck at the heart of global funding markets.