The Japanese Economic Suicide

How the Global Money Glitch Could Trigger a Worldwide Crisis

The Ecstasy of the Dollar 

September 22, 1985, Fifth Avenue, New York. At the Plaza Hotel, the finance ministers of the United Kingdom, West Germany, France, the United States, and Japan signed what would become the most significant economic agreement of the century—aimed at countering the rising value of the U.S. dollar.

Hold on. What does appreciation actually mean?

Since the term will appear often, it’s necessary to clarify it. Appreciation refers to the increase in one currency’s value relative to others. When a currency becomes too strong, exported goods become too expensive, damaging trade flows. The Plaza Accord was a coordinated effort to deliberately devalue the U.S. dollar and restore stable international trade. In 1985, nearly every economic actor was tied to the U.S. market, directly or indirectly. The direction was clear.

From the 1950s onward, thanks to major technological investment and post–Korean War industrial modernization, Japan had rapidly become the world’s second-largest economy and the most profitable manufacturing power. So influential, in fact, that it shaped global imagination: cyberpunk skylines, Blade Runner atmospheres, neon megacities in the rain. The rise of the Japanese empire seemed inevitable—a future where the sun never set.

But like all dreams, it fractured with the arrival of the 1990s. The Plaza Accord saved the United States, but condemned Japan for the same reasons. Central banks began selling dollars and buying yen and Deutsche marks, pushing the yen upward. Japanese exports became more expensive abroad, generating internal imbalances. By 1990, the yen had doubled in value. The crisis began from Japan’s own success: the country was facing a currency shock.

To protect exports, the Bank of Japan lowered interest rates, stimulating domestic consumption. Cheaper credit meant more liquidity and more investment. Asset prices soared—stocks, land, everything. The market grew without regard to real value. And the Japanese speculative bubble burst.

The consequences were dramatic. From 1991 to 2012, the country entered a deflationary spiral. Asset prices collapsed, loans lost collateral value, banks were trapped with bad debt. An entire generation faced a job market frozen in place. The economy stopped moving at the very moment the internet era began—the same technological wave that had once propelled Japan’s rise.

The 1990s marked the end of Japan’s high-growth era. The dream of a high-tech Japanese future vanished, even more so after the 2008 financial crisis.

The Birth of the Glitch 

The story resumes in 2012 with Shinzo Abe’s return to power and the launch of Abenomics. The idea was straightforward: lower interest rates again toward zero, expand liquidity, and encourage Japanese capital to flow abroad into higher-yield assets, especially U.S. Treasuries. The goal was to internationalize Japanese capital and restore confidence in domestic finance. With cheap money available, investors rushed in.

But the true mechanism behind the glitch lay in Japan’s public debt—now over 258% of GDP, the highest in the world, 90% held by the Bank of Japan. If the debt is internal and controlled, liquidity can be expanded without constraint. This enabled a structural anomaly known as the carry trade: borrowing yen at almost zero interest, investing abroad in higher-yield assets, and profiting from the spread.

However, this system only works in a stagnant economy. If interest rates rise or the yen appreciates, the model collapses. Because the carry trade is tied to global finance, companies and governments worldwide would be forced to repay loans in a currency suddenly more expensive, triggering chain reactions and financial instability.

Japan’s economy is balanced on extremely thin ice.

The Domino 

Today, the Global Money Glitch relies on fragile conditions. A single unexpected event or loss of confidence could trigger a global crisis.

Japan holds around $1.147 trillion in U.S. Treasuries. Purchasing these securities stabilizes the yen and supports exports. Or rather, used to. In 2024, the first cracks emerged. As interest rates rose, investors sold foreign assets to cover costs. To prevent inflation and banking instability, the Bank of Japan began selling U.S. Treasuries to normalize monetary policy.

The result: financial shock. It became clear that this system cannot last indefinitely.

Solutions? 

Yes—but none are painless. There would need to be an international debate on sovereign debt and the risks of the carry trade, coordinated market responses, and a slow normalization of Japanese interest rates. But such measures would increase public debt costs, weaken confidence, and reduce global liquidity. All of this in a country facing a deep demographic collapse.

Japan’s conservative political culture limits structural change. Sanae Takaichi’s intention to revive Abenomics suggests continuity, not reform. Meanwhile, BRICS+ aims to reshape global financial governance, China accelerates its industrial ascent, and geopolitical attention is elsewhere. Japan risks becoming the quiet fault line of the global system.

In a multipolar world, coordination is harder than ever.

There is one certainty: the carry trade cannot continue indefinitely. Its consequences will have to be confronted. An economy built on short-term convenience instead of long-term reform may soon force billions to face the cost of decisions made by others.

The Japanese Economic Suicide