This ‘mutually assured destruction’ threat in the $7.3 trillion JGB market helps prevent Japan from triggering a debt crisis — for now

Recent tremors in the $7.3 trillion Japan government bond market have raised fears that a debt crisis is brewing in the world’s fourth largest economy.

Japan’s debt is already more than 200% of GDP, and Prime Minister Sanae Takaichi’s plans for fresh fiscal stimulus are expected to deepen the hole. With snap elections coming up Feb. 8, her opponent is also promising a similar agenda as economic growth remains muted.

Investors have started to balk, with JGB yields surging lately...