Bitcoin surges to new highs above $118,000 as investors go risk-on

Key Points

• Record High Yields: Japanese bond yields, particularly the 40-year rate, surged past 4% to the highest level since 2007, marking a historic peak for any maturity of Japan’s sovereign debt in over three decades.**
• Investor Concerns: Investors are wary of Prime Minister Sanae Takaichi’s proposed food tax cut, fearing it will be funded by increased government bond issuance, exacerbating fiscal concerns.**
• Global Impact: The volatility in Tokyo’s bond market is spilling over into global markets, affecting US Treasuries, Australian, and New Zealand bonds, with potential risks of a broader JGB meltdown.**
• Attractive Market: Despite the selloff, the spike in yields is drawing foreign investors, who now dominate monthly cash JGB transactions, while Singapore Exchange Ltd. plans to introduce futures on longer-dated Japanese bonds.**

Summary

The Japanese bond market experienced a significant slump, with yields reaching record highs, as the 40-year rate surpassed 4% for the first time since its 2007 debut. This surge, driven by investor skepticism over Prime Minister Sanae Takaichi’s proposal to cut food taxes without a clear funding source, has led to fears of increased government bond issuance. Since Takaichi’s October appointment, 20- and 40-year yields have risen by about 80 basis points, reflecting broader concerns over government spending and inflation. The volatility in Tokyo has rippled into global markets, impacting US Treasuries and bonds in Australia and New Zealand. Despite the selloff, the higher yields are attracting foreign investors, who now account for 65% of monthly cash JGB transactions. Meanwhile, local insurers sold a record amount of long-term bonds in December, signaling bearish sentiment. As Takaichi calls for a snap election on February 8, the bond market remains a critical indicator of investor confidence, with potential global repercussions if a JGB meltdown intensifies.

Key Points

• Record Trade Surplus: China achieved a record $1.2 trillion trade surplus in 2025, despite new trade barriers, by diversifying export markets to regions like South America, Africa, and Southeast Asia.**
• Challenges in New Markets: Salespeople report smaller, less lucrative orders from new markets compared to U.S. sales, leading to lower commissions and increased financial uncertainty.**
• Increased Work Pressure: Export sales staff face longer hours, higher labor intensity, and emotional stress, with some experiencing health issues like insomnia and hair loss.**
• Profit Decline: Government data indicates a 13.1% year-on-year drop in profits for China's industrial firms in November 2025, reflecting the economic strain of market reorientation.**
• Risks of Diversification: Firms chasing high volumes of cheap orders in alternative markets often face higher default risks and longer payment cycles, adding to operational challenges.**

Summary

In 2025, China recorded a historic $1.2 trillion trade surplus despite U.S. tariff hikes under President Trump, which reduced U.S. orders by a third. This prompted a strategic shift to diversify exports to lower-income markets like South America, Africa, and Southeast Asia. However, Reuters interviews with 14 export salespeople reveal significant challenges behind the impressive figures. New markets often yield smaller, less profitable orders, reducing commissions and increasing financial uncertainty for workers. Sales staff also face heightened stress, longer hours, and health issues like insomnia, as they navigate unfamiliar markets and intense competition. Industrial profits dropped 13.1% year-on-year in November, reflecting economic strain. Experts warn that relying on foreign markets for growth is unsustainable, as weak domestic consumption forces Chinese firms to compete overseas, eroding profits. The pressure on sales agents, coupled with risks like longer payment cycles and client defaults, suggests that replicating 2025’s trade success may be difficult in the future.

Key Points

• Trump's Motivation: President Trump linked his desire to purchase Greenland to not receiving the Nobel Peace Prize, as stated in a letter to Norwegian Prime Minister Jonas Gahr Store.**
• Tariff Threats: Trump announced plans to impose 10% tariffs on eight European countries starting February 1, escalating to 25% by June 1 if no agreement is reached, citing their opposition to the US purchase of Greenland.**
• European Response: The targeted European nations, including Denmark and Germany, condemned the tariff threats as undermining transatlantic relations, with leaders vowing not to be blackmailed.**
• Economic Impact: Analysts, including Goldman Sachs, predict a minor economic hit to Europe from the tariffs, while Deutsche Bank warns of potential European retaliation by selling US assets worth $8 trillion.**
• Legal Concerns: Trump expressed frustration over the US Supreme Court's delay in ruling on the legality of his global trade duties, viewing it as critical to national security.**

Summary

President Donald Trump has tied his pursuit of Greenland to his frustration over not winning the Nobel Peace Prize, as revealed in a letter to Norway’s Prime Minister. Initially citing national security, Trump now appears motivated by personal grievance. In response to European opposition to the Greenland purchase, he announced tariffs of 10% on eight countries—Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland—starting February 1, 2026, increasing to 25% by June if unresolved. These nations, already facing US tariffs, criticized the move as damaging to transatlantic ties, with leaders like Denmark’s Mette Frederiksen rejecting blackmail. Economically, Goldman Sachs estimates a minor GDP impact on Europe, while Deutsche Bank warns of potential European retaliation via selling $8 trillion in US assets, risking a weaker dollar. Trump also expressed concern over the US Supreme Court’s delay in ruling on his trade duties, calling it a national security issue. The escalating trade tensions have unsettled global markets, though some analysts believe Europe’s economic resilience may mitigate long-term effects.