In the Tokyo trading room, traders' eyes are firmly fixed on the screens— the yield on the ten-year government bonds has surged to 1.98%, a rare high not seen in forty years. This is not just a string of numbers; it reflects the deep crisis that the entire Japanese economic system is currently experiencing.

Scholars in Washington have begun to sound the alarm. According to data, the scale of Japan's national debt has soared to 263% of its GDP. To put it another way: for every 100 yen in tax revenue the government collects, it has to allocate 33 yen to pay interest on its debt. This level of debt pressure is nearing a critical point, leaving little room for maneuver.

**Economic Warning Light**

In the face of data, Japan's economic weakness has become increasingly difficult to conceal. In the third quarter of 2025, the real GDP fell at an annual rate of 1.8%—this marks the first negative growth in six consecutive quarters. The shift from positive to negative economic growth indicates that the problems are no longer superficial.

Several pillars supporting the Japanese economy are beginning to wobble. Personal consumption accounts for more than half of the economy, but the growth rate is only 0.1%, showing almost no growth. Persistently high prices have severely eroded consumers' purchasing power, making wallets increasingly tight.

The export route has also been blocked. Affected by tariff policies, Japan's exports to the U.S. have weakened for seven consecutive months. Meanwhile, the government has launched a stimulus package of 21.3 trillion yen to try to rescue the situation, but as a result, the stock market, bond market, and foreign exchange market have experienced a rare "triple kill" situation—investors have voted with their feet.

**Hidden Structural Risks**

More dangerous problems, however, are hidden deep within Japan's financial system. This system harbors a batch of "zombie companies"—they have long lost their ability to generate profits on their own, yet they survive thanks to the continuous infusion of funds from the government and banks. These companies absorb about 30% of the loan resources from Japan's banking system, supporting nearly 10% of the employment population.

This group of enterprises is like a ticking time bomb; whenever the banks or government can no longer support them, they will collectively collapse. Once they collapse, the entire financial chain will face a shock. This structural problem is more concerning than the superficial economic data—because it represents a severe inefficiency in the economy and a distortion in resource allocation.

Japan's situation is evolving from periodic difficulties into a structural crisis. With debt pressure, weak consumption, and lackluster exports, along with these companies that rely on financial support to survive, any change in one link can quickly spread the transmission effect. In such a macroeconomic environment, it is reasonable for market risk premiums to rise, and the volatility of various assets will also increase accordingly.