What if doubts over Japan's debt sent JGB yields soaring?
A JGB sustainability scare spikes long yields and forces a yen-carry unwind: as JGB yields rise and BoJ control wobbles, Japanese capital repatriates, draining the funding currency and hitting global carry/EM FX. The sharpest recent rhyme is the Aug-2024 yen-carry unwind that briefly cratered global risk and the Nikkei. Forward angle: with BoJ now hiking off YCC and Japan the world's largest creditor, a disorderly JGB move transmits through global duration and USD/JPY faster than markets price — the cleanest expression is long yen/short carry, not the muted HY-credit leg shown.
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The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 1–3 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Japan's debt sustainability is questioned; JGB yields spike and the yen swings. The trigger decomposes into signed root‑shocks — FX carry appetite ▼ · Credit spreads ▲ — which propagate through our causal graph to the markets below.